Dividend stocks are famous for generating regular income, providing investors with the opportunity to earn while they sleep. However, investors seeking this form of passive income should focus on shares of companies with a stellar track record of dividend payments and growth. The solid payout history indicates stability and strong financial health, making them reliable investments. 

Beyond providing regular income, dividend stocks also present the opportunity for long-term capital appreciation. Holding onto these investments over time allows investors to benefit from both the steady stream of dividend payments and potential increases in stock value. 

Considering these factors, Enbridge (ENB), Coca-Cola (KO), and Energy Transfer (ET) are three notable options for investors seeking worry-free dividend income. These companies have been consistently paying and increasing their dividends for decades. Additionally, they have a growing earnings base to support future payouts. Let's delve deeper into why these stocks are top options for earning passive income, even while you sleep. 

Dividend Stock #1: Enbridge (ENB)

With its durable dividend payouts, Enbridge (ENB) is a dependable investment for generating regular passive income. The midstream energy company transports crude oil (CLK24) and natural gas (NGK24) through its massive network of pipelines. Moreover, it holds investments in renewable energy assets and operates natural gas utility business.  

Enbridge’s energy infrastructure assets are strategically located between key supply basins and high-demand markets. Moreover, Enbridge’s assets benefit from long-term contracts, power purchase agreements (PPAs), regulated cost-of-service tolling frameworks, and other low-risk commercial arrangements. These factors position the company to consistently generate strong distributable cash flows (DCF) and increase dividends annually. 

Thanks to its high-quality assets, Enbridge generates resilient cash flows across commodity cycles. This stability allows the company to consistently provide higher cash to its shareholders. Enbridge foresees a 3% annual increase in its DCF until 2026, with a projected 5% growth beyond that period. This suggests that Enbridge could sustain its dividend growth rate in line with its DCF expansion.  

Out of the 18 analysts covering ENB, seven have a “strong buy” recommendation, three recommend a “moderate buy,” six analysts suggest a “hold,” and two recommend a “sell.” The stock offers a lucrative yield of over 7%. Moreover, the average price target for Enbridge stock is $40.39, which implies 12% growth potential from current levels. 

Dividend Stock #2: Coca-Cola (KO)

Non-alcoholic beverage giant Coca-Cola (KO) stands out as a top investment choice for generating worry-free passive income. Its ability to consistently grow its earnings, even amidst challenging market conditions, underscores the reliability of its payouts. Notably, the company paid dividends worth about $7.95 billion and $7.61 billion in 2023 and 2022, respectively. 

The company in February increased its annual dividend to $1.94 per share from $1.84 per share. This upward adjustment marks the 62nd consecutive year of dividend growth for Coca-Cola. 

The company's strategic focus on marketing, coupled with its large addressable market, positions KO favorably to enhance sales and profitability, thereby supporting its dividend distribution. Coca-Cola stands to benefit from its ability to increase sales volume and pricing. Additionally, its solid balance sheet provides flexibility to pursue growth initiatives, including acquisitions. 

Coca-Cola stock currently offers a dividend yield of close to 3%. Moreover, 12 out of 17 analysts have rated KO stock a “Strong Buy.” The analysts have a 12-month average target price of $66.07, which is about 8% higher than current levels. Notably, this positive analyst sentiment aligns with the long-term investment strategy of renowned investor Warren Buffett, who counts Coca-Cola among his top five holdings. 

Dividend Stock #3: Energy Transfer (ET)

Energy Transfer (ET) operates an energy infrastructure business and is engaged in the transportation and storage of natural gas, crude oil, and natural gas liquids (NGLs). With holdings in top production basins and demand hubs across the U.S., and an emphasis on acquisitions, the company is poised to capitalize on growing demand for energy and deliver significant cash flows to cover its payouts. 

A noteworthy aspect of Energy Transfer’s business model is its reliance on fee-based contracts, which account for the majority of its earnings and have low sensitivity to fluctuations in commodity prices. Approximately 90% of its EBITDA are derived from these stable fee-based contracts, ensuring the consistent generation of high-quality earnings necessary to sustain dividend payouts. 

Energy Transfer recently increased its quarterly cash dividend by 3.3% to $0.315 per share, reinforcing its commitment to rewarding shareholders. ET stock currently offers a compelling yield of 8%. Further, the company targets a 3-5% growth in its annual dividends in the coming years.   

Overall, the company’s diversified asset portfolio, which focuses on fee-based revenue streams and strategic acquisitions, is expected to drive its cash flows and dividend payments. 

Currently, 13 out of 15 analysts rate ET a “Strong Buy.” One analyst recommends a “Moderate Buy,” and one has a “Hold.” The average price target of $17.64 implies about 13.5% upside potential from current levels.