Enbridge Inc. Stock: Why Is This Top Dividend Stock Rebounding?

Here is why a rebound in Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock may have already begun after a 30% slide in the value of this top dividend stock in the past year.

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Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock has been in hot water for more than a year now. Investors deserted this energy infrastructure giant on concerns that it wouldn’t be able to maintain its high dividend amid rising debt.

Its stock was down over 30% during the past 12 months, weakened by surging bond yields and uncertainty about its future dividend plans. But that perception is changing after a couple of positive developments.

Asset-sale plan

The biggest challenge for the Enbridge’s CEO Al Monaco was to show to investors that North America’s largest pipeline operator was on track to cut its $61 billion debt load. On that front, the company made considerable progress during the past quarter.

The Calgary-based Enbridge announced last week that it has finalized a pair of deals that generated combined proceeds of roughly $3.2 billion. Enbridge said it is selling a 49% stake in wind and solar energy assets in North America and Germany for $1.75 billion to the Canada Pension Plan Investment Board.

In a separate deal, the company said an affiliate of Boston-based private equity firm ArcLight Capital Partners LLC would buy its Midcoast Operating LP unit and related subsidiaries for about $1.44 billion. The sale includes natural gas gathering and processing assets in Texas, Oklahoma, and Louisiana.

According to media reports, more deals may be coming soon. Future asset sales may include a group of Canadian gathering and processing assets that could fetch more than $1.56 billion. The assets, located in British Columbia and Alberta, were owned by Spectra Energy, which Enbridge acquired for $28 billion last year.

These sales are part of Enbridge’s longer-term plan in which the company has identified $7.76 billion in non-core assets that it plans to unload.

The positive news on the company’s asset sales comes as Enbridge beat analysts’ consensus forecast for its adjusted profit in its first-quarter earnings report.

On an adjusted basis, Enbridge says it earned $1.38 billion, or $0.82 per share, for the quarter compared to $657 million, or $0.57 per share, in the first quarter of 2017. Analysts had expected a profit of $0.66 per share, according to Thomson Reuters.

The company beat analysts’ estimates, backed by a strong operational performance across all business segments, including record quarterly average throughput on the liquids mainline system.

“Our earnings and cash flows have grown significantly year over year; we’ve raised over $3 billion of hybrid securities and have now announced over $3 billion of asset sales, all consistent with our strategy to focus on a low-risk pipeline and utility business model and to accelerate funding of our secured capital program,” Al Monaco said in the earnings statement.

The bottom line

Trading at $42.40, Enbridge is still down 13% this year. But the latest signs suggest its stock has probably hit the bottom after gaining about 13% from its lowest point this year. With an annual dividend yield of 6.35%, Enbridge is my top pick from the list of beaten-down energy stocks in North America. With the forward price-to-earnings multiple of 17 and 11% dividend growth, it’s a good time to get exposure to this top dividend stock. 

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

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