If you happen to’re critical about investing that retains paying you lengthy after you’ve stopped working, then dividend investing ought to ideally be a part of your technique. Whether or not you’re aiming to fund early retirement or simply cowl month-to-month payments with minimal effort, selecting the best dividend shares could make all of the distinction. That is primarily as a result of not all of them supply the steadiness, consistency, and long-term fundamentals wanted to assist a dependable revenue by way of completely different market cycles.
That’s precisely the place Canadian power shares like South Bow (TSX:SOBO) come into play. After its spin-off from TC Power practically a 12 months in the past, South Bow is persistently delivering steady efficiency, strong dividends, and powerful money circulate — all backed by long-term contracts and important oil transport property. Let me clarify why South Bow might assist you construct a powerful basis for lifelong passive revenue.
A prime Canadian power inventory for passive revenue
As a Calgary-based power infrastructure agency, South Bow owns and operates a 4,900-kilometre pipeline community throughout Canada and the U.S., connecting Alberta’s oil sands to key American refining markets.
On the time of writing, SOBO inventory was buying and selling at $36.50 per share, with a market cap of $7.6 billion. At this market value, it affords a extremely juicy 7.6% annualized dividend yield, paid out quarterly.
Whereas its enticing yield alone makes it interesting for revenue buyers, what units it aside is the predictability that comes with its strong enterprise mannequin. Notably, about 90% of its normalized EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) is secured underneath long-term contracts. This enables South Bow to ship steady money circulate, it doesn’t matter what’s occurring with oil costs or the broader financial system within the brief time period.
A resilient efficiency, regardless of a tricky setting
Within the second quarter of 2025, this power agency generated US$524 million in income and posted a internet revenue of US$96 million. Whereas the quarter marked a slight sequential drop in its normalized EBITDA due primarily to weaker contributions from its advertising and marketing section, its general monetary outcomes nonetheless held up effectively.
South Bow’s normalized EBITDA for the quarter got here in at US$250 million, with over US$234 million of that coming from its core Keystone Pipeline System. In the meantime, the corporate reported distributable money circulate of US$167 million, sufficient to simply cowl the US$104 million in dividends it declared for the quarter.
Robust basis for future development and revenue
In addition to its largely predictable money flows, South Bow’s long-term technique makes it an much more reliable inventory. In contrast to firms chasing high-risk development, it’s primarily targeted on maximizing shareholder worth with a transparent, disciplined method.
It’s investing in initiatives just like the Blackrod Connection, which is able to enhance connectivity inside Alberta’s oil sands and is anticipated to be accomplished by early 2026. The anticipated money flows from this undertaking alone might drive the corporate’s earnings momentum effectively into 2027.
To reduce dangers, South Bow plans to steadily scale back its leverage over the following three years, with a goal to deliver its internet debt-to-EBITDA ratio all the way down to 4. That transfer, mixed with its concentrate on capital effectivity and infrastructure-led development, offers the corporate extra room to maintain and even enhance its dividend over time.
Silly takeaway
Curiously, over 96% of South Bow’s income comes from investment-grade purchasers, giving it extra of a utility-like really feel than a typical power inventory — simply with a a lot increased dividend yield. So, in case you’re searching for an power inventory that may pay you for all times with out a lot threat, SOBO inventory may simply be price shopping for in proper now.
