Income Investors: 3 Reasons to Buy Enbridge Inc. Stock Today

Enbridge Inc. has become very attractive for income investors after the double-digit losses this year. Here are the top 3 reasons that explain why this stock is a bargain.

| More on:
pipeline

If you’re an income investor searching for a high-yield dividend stock then Enbridge Inc. (TSX:ENB)(NYSE:ENB) could be one of your best bets in today’s market.

Enbridge stock has fallen about 13% so far this year, pressured by a variety of reasons, including the Bank of Canada’s drive to hike interest rates, political uncertainty hitting North American markets, and a general dismal outlook for energy companies.

But amid this general selloff, we’ve seen some of the finest businesses being painted with the same brush, and Enbridge is certainly one of the them.

Enbridge operates the world’s longest crude oil and liquids transportation system which insulates it from the cyclical nature of the commodity markets. The company is a leader in gathering, transportation, processing and storage of natural gas in North America, serving about 3.5 million retail customers in Ontario, Quebec, New Brunswick and New York State.

Here are the top three reasons which I think make this top dividend stock a very attractive buy.

1.Yield

Enbridge’s yield is near 5% which is a much higher than its average 5-year yield of about 3% and the industry average of 2.75%. For investors, this is a very opportune time to pick this very juicy dividend yield when other asset classes offer very minimum rates.

2. Dividend growth

When you are deciding which dividend stock offers a better value for your dollar, one of the most important factors to look for is the dividend growth. This is important because you want to make sure your investment is keeping up with the cost of living and doesn’t losing its value with a rising rate of inflation.

On this metrics, Enbridge has done a great job. During the past five years, its dividend payout grew ~17% against the industry average of 13%.

The company plans to continue with this growth trend by increasing its dividend payout 10-12% each year through 2024 as it produces more cash from some big-ticket infrastructure projects following its acquisition of Spectra Energy.

3. Earnings growth

Just focusing on dividends and ignoring the future earning potential may land you in a trouble. After all, future dividend hikes come from growing profits and the company’s ability to generate more cash from its assets.

Being a stable and reliable dividend payer, Enbridge is in a growth mode, as well. Since its last year’s merger with Spectra Energy, the combined company’s project pipeline has expanded substantially, with $26 billion of secured growth projects in execution and another $48 billion of projects under development.

The benefit of this merger was reflected in Enbridge’s second-quarter earnings when its profit more than tripled to $919 million, or $0.56 per share, from $301 million, $0.33 a share a year earlier.

Investors takeaway

The current weakness in Enbridge stock opens a window of opportunity for income investors to make this top dividend stock a part of your portfolio. Trading near $50 a share, Enbridge is very close to the 52-week low. 

The company has paid dividends to shareholders every year since 1953. This superb history should be enough to satisfy wary investors that they can rely on Enbridge’s dividend cheques during the times of war, recessions, and financial crises.

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 Haris Anwar has no position in any stocks mentioned. The Motley Fool owns shares of Enbridge.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Double Your TFSA Contribution

If you're looking to double up that TFSA contribution, there is one dividend stock I would certainly look to in…

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Concept of multiple streams of income
Dividend Stocks

Is goeasy Stock Still Worth Buying for Growth Potential?

goeasy offers a powerful combination of growth and dividend-based return potential, but it might be less promising for growth alone.

Read more »

A person looks at data on a screen
Dividend Stocks

How to Use Your TFSA to Earn $300 in Monthly Tax-Free Passive Income

If you want monthly passive income, look for a dividend stock that's going to have one solid long-term outlook like…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Passive Income Seekers: Invest $10,000 for $38 in Monthly Income

Want to get more monthly passive income? REITs are providing great value and attractive monthly distributions today.

Read more »

Forklift in a warehouse
Dividend Stocks

Invest $9,000 in This Dividend Stock for $41.88 in Monthly Passive Income

This dividend stock has it all – a strong yield, a stable outlook, and the perfect way to create a…

Read more »

An investor uses a tablet
Dividend Stocks

3 No-Brainer TSX Stocks to Buy With $300

These TSX stocks provide everything investors need: long-term stability and passive income to boot.

Read more »

analyze data
Dividend Stocks

End-of-Year Retirement Planning: 3 Buy-and-Hold Stocks for Canadian Investors

Choosing the right stocks for the retirement portfolio differs from investor to investor. However, there are some top stocks that…

Read more »