Enbridge Inc. Stock Now Yields 5%: Should You Buy?

Here is why Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock is a buy after its 17% drop this year.

| More on:
The Motley Fool

Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock tumbled 5% during the week ended on October 30, after the company announced slightly disappointing third-quarter earnings.

Investors were not happy with a decline in the company’s natural gas pipeline volumes during the quarter, which averaged 1.53 million cubic feet per day in Canada, down 1%, and a 2.4% drop in the U.S., where it moved 1.64 mmcf per day, according to the company’s press release.

Earnings attributable to shareholders was $765 million, or $0.47 per share, compared with a loss of $103 million, or $0.11 per share, a year earlier.

Adjusted to remove items, Enbridge earned $0.39 per share, missing consensus by $0.04 a share, according to Thomson Reuters data.

Buying opportunity?

Last week’s slide in the value of shares has extended Enbridge’s 17% losses for 2017 as investors shunned this top utility company on various concerns, including the Bank of Canada’s drive to hike interest rates, political uncertainty hitting North American markets, and a generally dismal outlook for energy companies.

But despite these losses, Enbridge’s strength in the sector remains intact. It 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.

Despite a falling gas output in the third quarter, the numbers show Enbridge was benefiting from its last year deal to acquire Spectra Energy’s assets, which created North America’s largest energy infrastructure company.

The company moved 2.5 million bpd of crude oil on its mainline system across Canada and the U.S. during the quarter, up 6% year over year.

Enbridge’s liquid volumes are likely to surge further in the coming quarters, as the company awaits a regulatory from Minnesota for its Line 3 replacement project, which will double capacity on the line to 760,000 barrels per day.

The bottom line

There is no doubt Enbridge did not meet investors’ expectations in the third quarter, but I think this setback is temporary, and any further pullback provides a good entry for long-term dividend investors.

The company’s annual dividend yield has reached 5% at the time of writing — more than double what investors were getting in 2011. If you are seeking a stable dividend stock that regularly hikes its payout, then Enbridge is your best bet.

The company plans to grow its $2.44-a-share yearly dividend by 10-12% each year through 2024, as it produces more cash from some big-ticket infrastructure projects following its acquisition of Spectra Energy.

Enbridge’s valuation has become attractive after 17% drop in its share price this year. I think it is a good bargain for long-term investors.

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. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Dividend Stocks

Enbridge Stock: This Dividend Aristocrat Looks Like a Steal in 2023

Here are some key factors that make ENB a great Canadian dividend stock to buy on the dip in 2023.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

U.S. Debt Ceiling: Is It Safe to Invest Right Now?

The U.S. debt ceiling is in the headlines again. You can play it safe by investing long term in wonderful…

Read more »

analyze data
Dividend Stocks

How to Invest $20,000 to Make Ultra-Safe Passive Income

Got $20,000 to invest for passive income? These three stocks are perfect for earning ultra-safe passive income for the long…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

For Passive Income: How to Turn $25,000 Into $158 Per Month

High-yield, monthly dividend stocks trading on the TSX such as Slate Grocery can help you earn a predictable stream of…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Canadian Dividend Stocks to Buy for Consistent Passive Income

These top dividend stocks have raised their distributions annually for more than two decades.

Read more »

Piggy bank next to a financial report
Dividend Stocks

Self-Directed RRSP: 2 Top Dividend Stocks to Buy in June 2023

These top TSX dividend stocks look cheap to buy today and offer attractive dividend yields.

Read more »

Dividend Stocks

Looking for Reliable Retirement Income? Consider These Dividend-paying Stocks

National Bank of Canada and another reliable income stock that could be a perfect fit for your retirement fund this…

Read more »

grow money, wealth build
Dividend Stocks

Are You Looking for High-Yield Investments? 3 TSX Stocks That Offer Excellent Payouts

These dividend stocks all offer solid payouts, as well as yields in the five to six percent range. So get…

Read more »