Should Enbridge Inc. Be a Top RRSP Dividend Pick Today?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) is down 20% in the past 12 months. Is this a gift for RRSP investors?

Canadian savers are searching for stocks to add to their RRSP portfolios.

The recent downturn in the equity markets is providing investors with opportunities to pick up some of Canada’s top dividend stocks at potentially attractive prices.

Let’s take a look at Enbridge Inc. (TSX: ENB)(NYSE: ENB) to see if it deserves to be on your buy list right now.

Growth

Enbridge bought Spectra Energy last year in a $37 billion deal that created North America’s largest energy infrastructure company.

Spectra added important gas assets to complement Enbridge’s heavy focus on liquids pipelines and provided a nice boost to the capital plan. In fact, Enbridge is working its way through $22 billion in near-term commercially secured projects that should be completed through 2020.

Debt reduction

Enbridge plans to reduce debt by $4 billion in the next few years. Part of the funds will come from $10 billion in non-core asset sales, of which $3 billion is targeted for 2018. The company is undergoing a shift to focus on regulated businesses, and this should improve investor confidence.

Dividend outlook

As the new assets go online, Enbridge expects cash flow to increase enough to support annual dividend growth of at least 10% through the end of 2020.

The company raised the payout by 10% for 2018, and that comes after a 15% increase last year.

Enbridge has a strong track record of bumping up the distribution, so investors should feel comfortable with the guidance.

Risks

Rising interest rates could increase borrowing costs and take a chunk out of cash flow available for distributions. Higher rates also make fixed-income options more competitive with dividend stocks, and there is a line of thinking that funds could shift out of names such as Enbridge as rates increase.

In addition, anti-pipeline sentiment is making it harder for large, new projects to get the green light.

Should you buy?

The stock is down from $55 per share last year to the current price of about $44. That puts the dividend yield above 6%.

More volatility could be on the way in the near term, but rate fears might be a bit overblown. At this point, I think Enbridge look attractive for buy-and-hold RRSP investors who might be searching for a top-quality dividend stock to add to their portfolios.

Fool contributor Andrew Walker owns shares of Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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