Enbridge Inc. (TSX:ENB): Is it Time to Buy This Canadian Dividend Stock?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) is up more than 15% in the past month. Are more gains on the way?

| More on:

Enbridge Inc. (TSX: ENB)(NYSE: ENB) is up more than 15% in the past month and has jumped nearly 25% after hitting a five-year low in April.

Let’s take a look at the current situation to see if more upside might be on the way.

Asset sales

Enbridge is working through a major transition designed to focus on regulated oil and gas pipeline and utility businesses. As a result, management has identified $10 billion in non-core assets it plans to monetize to reduce debt levels and fund ongoing development opportunities.

Originally, the company said it planned to raise about $3 billion through divestitures in 2018. As of the time of writing, the company has already signed deals for close to $7.5 billion, so demand is apparently strong for the company’s assets.

In May, Enbridge announced a $1.75 billion deal with the Canada Pension Plan Investment Board (CPPIB) to sell its Canadian renewable power assets and the company’s interest in two German offshore wind projects. At the same time, Enbridge also announced a US$1.12 billion agreement to sell natural gas gathering and processing assets in the United States to ArcLight Capital Partners.

On July 4, Enbridge said it is selling its Canadian natural gas gathering and processing businesses to Brookfield Infrastructure for $4.31 billion.

Growth

Enbridge is restructuring after its $37 billion acquisition of Spectra Energy last year. The purchase added strategic gas assets and provided an important portfolio of development projects, but the market didn’t like the impact on the balance sheet amid an era of rising interest rates and concerns that larger pipeline projects wouldn’t get built.

As a result, the stock slipped from $58 in late 2016 to $38 per share in April 2018.

The assets sales have helped restore investor confidence, and Enbridge recently received the green light from the Minnesota Public Utilities Commission to move ahead with the Line 3 Replacement Project. Enbridge hopes to complete the pipeline by the end of 2019.

The company is working through a total of $22 billion in near-term secured projects, of which $7 billion will go online in 2018.

Dividends

Enbridge previously said it intends to raise the dividend by 10-12% per year through 2020. The recent assets sales and Line 3 approval make it more likely the company will deliver on the guidance. Enbridge increased the distribution by 10% for 2018 and has hiked the payout for 23 straight years, with a compound annual dividend-growth rate of 11%.

Should you buy?

The recent developments on the assets sales and the Line 3 approval should remove some of the clouds that are hanging over the stock.

Investors who got in below $40 are already happy campers, but more upside should be on the way. At the current price, you can lock in a solid 5.6% yield and anticipate steady dividend growth in the coming years.

If you have some cash sitting on the sidelines, I think Enbridge looks attractive today.

Fool contributor Andrew Walker owns shares in Enbridge. The Motley Fool owns shares of Enbridge. Brookfield Infrastructure and Enbridge are recommendations of Stock Advisor Canada.

More on Dividend Stocks

man looks surprised at investment growth
Dividend Stocks

1 RRIF Withdrawal Could Shrink Your OAS More Than You Expect

A big RRIF withdrawal can trigger an OAS clawback, so building TFSA flexibility and dividend growth beforehand can help.

Read more »

a person watches stock market trades
Dividend Stocks

A High Yield Won’t Save You From a Dividend Cut: This 2.5% Payout Looks Safer

A huge dividend yield can be a trap if it’s high because the stock price is falling and a cut…

Read more »

dividend stocks are a good way to earn passive income
Dividend Stocks

$50,000 in a TFSA Could Pay You $227.16 a Month Without Selling a Share

A $50,000 TFSA can generate a +$200 monthly “paycheque” if you own a reliable monthly payer like CT REIT.

Read more »

Illustration of data, cloud computing and microchips
Dividend Stocks

The Best Discounted TSX Stocks to Snap Up Now

These two discounted TSX stocks are trading well below their 52-week highs even as they continue to show encouraging business…

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

Don’t Fall for Telus’s Dividend: Buy This Monthly High-Yield ETF Instead

Telus (TSX:T) stock has a high yield, but a bad history of dividend cuts.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Down 24%: This Monthly Dividend Stock Is a Must-Buy

CAPREIT stock is down 24% over the last year, but its monthly distributions, resilient Canadian rental operations, and discounted valuation…

Read more »

arrows hit bullseye on target
Dividend Stocks

1 Canadian Dividend Champion up 182% for Lifetime Income

Great-West Lifeco stock has surged 182% over the last decade, and its latest earnings growth and expanding retirement business could…

Read more »

woman looks at iPhone
Dividend Stocks

Is Telus a Good Stock to Buy Now?

Telus stock has fallen sharply amid a dividend reset and weaker outlook, but its improving cash priorities and aggressive deleveraging…

Read more »