Enbridge Inc. (TSX:ENB)(NYSE:ENB) shares are starting to dip again after an impressive rally last year. ENB is down nearly 15% this year, and the dividend yield has risen to nearly 5%, which is substantially higher than the company’s historical average yield. Shares appear cheap, and I think long-term income and dividend-growth investors should be pouncing at the opportunity to pick up shares of a fantastic business at a considerable discount to its intrinsic value.
Rock-solid dividend-growth king that you should really put in your TFSA
If you’ve still got room in your TFSA, then you should seriously think about adding a dividend-growth king like Enbridge to your portfolio. Not only does the company offer a gigantic dividend yield of about 5% today, but this dividend is likely to grow by a huge amount over the next few years. It’s one of the few stocks out there that caters to the needs of both income investors and dividend-growth investors. Whether you need income now, or you want to lock in a gigantic dividend a decade from now without sacrificing stability, Enbridge is a solid choice. And if it’s in your TFSA, you’ll be able to snowball your wealth that much quicker.
Enbridge has grown its dividend by a huge amount over the past few years, and there’s reason to believe the same magnitude of dividend growth can be expected in the years ahead.
More dividend growth up ahead
Earlier this year, Enbridge closed the $37 billion deal to acquire Spectra Energy. The deal adds natural gas assets, which fit in very nicely with Enbridge’s network of pipelines. Approximately $4 billion worth of secured projects have been added to the pipeline, and the management team expects its efforts will boost its future cash flow by a significant amount and will be able to support dividend raises over 10% or more until the conclusion of 2024.
Yes, Enbridge is in the business of energy delivery, but that doesn’t mean it’s overly sensitive to the price of commodities, as oil like producers are. Enbridge is responsible for moving liquids from point A to point B, and it has long-term contracts with its clients, ensuring a stable cash flow stream, which I believe investors should be paying a premium for.
Shares for ENB currently trade at a 35.86 price-to-earnings multiple, a 1.6 price-to-book multiple, and a 10.3 price-to-cash flow multiple, all of which are substantially lower than the company’s five-year historical average multiples of 65.6, 4.5, and 12.8, respectively. They’re cheap on a historical basis, and the long-term dividend-growth prospects are not in jeopardy.
If you’re a long-term investor, it’d be a very wise move to buy a chunk of ENB right now with the intention of buying more on the way down.
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