2 Falling Dividend-Growth Stocks I’d Buy With an Extra $10,000

Canadian National Railway Company (TSX:CNR)(NYSE:CNI) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are starting to look attractive. Here’s why.

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The stock market rally is taking a bit of a breather, and investors who missed out on the big move since January are finally getting a chance to pick up some top names at attractive prices.

Here are the reasons why I think investors with some extra cash on the sidelines should consider Canadian National Railway Company (TSX:CNR)(NYSE:CNI) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) right now.

CN

CN’s investors rode the crude-by-rail wave to some hefty profits in recent years, but market conditions have changed and producers are not using railways to ship as much oil. Demand for drilling supplies and frac sand are also down, and these factors are hitting revenues in CN’s overall energy segment.

As a result, the stock is giving back some of its gains, but investors should look at the broader picture before throwing in the towel.

CN serves many sectors in the economy, and when one group hits a rough patch, another usually picks up the slack. As an example, CN’s forestry and automotive customers are doing very well thanks to the oil rout’s heavy toll on the value of the Canadian dollar. The weak loonie also means earnings generated south of the border become more lucrative when converted to Canadian currency.

The bottom line?

CN is still a very profitable business. In fact, the company just reported Q1 2016 net income of $792 million, a 13% gain over the same period last year.

CN’s dividend only yields 2%, but the company increased the payout by 20% earlier this year, and investors have enjoyed strong growth in the distribution for the past two decades. Overall returns have also been very impressive.

A $10,000 investment in CN just 15 years ago would be worth $115,000 today with the dividends reinvested.

Enbridge

Enbridge has also taken a hit as a result of low oil prices, but the sell-off in the stock looks overdone.

The company doesn’t produce the commodity; it simply moves oil from the point of production to the end user and charges a fee for the service. According to a company report, moves in energy prices directly impact less than 5% of Enbridge’s revenue.

Pundits are concerned the oil rout will hit longer-term demand for new pipelines. That’s certainly a valid concern if oil prices remain at low levels for an extended period of time, but Enbridge has the financial firepower to grow through acquisitions and already has enough projects on the go to carry it through the next three years.

The company will complete $18 billion in new infrastructure through 2018. As the new assets go into service, Enbridge should see revenue and cash flow grow enough to support dividend increases of 8-10% per year. The stock currently offers a yield of 4.2%.

Like CN, Enbridge has been a fantastic generator of wealth for long-term investors.

A $10,000 investment in the stock 15 years ago would be worth $112,000 today with the dividends reinvested.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

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