Enbridge Inc. (TSX:ENB) Is a Great Long-Term Buy Right Now

Investors might be shocked at this, but Enbridge Inc. (TSX:ENB)(NYSE:ENB) is outperforming the TSX index over the course of the trailing six-monthly period. That’s the truth.

Enbridge is one of a handful of companies that have seen their stock price dip sharply on bad news or poor performance, but in reality, those companies perceived to be perennial underperformers remain impeccable investment options for long-term growth and income-seeking investors.

The allure of Enbridge

Enbridge has an incredibly lucrative business model. The company has a massive energy infrastructure that spans North America, including one of the biggest pipeline networks. Energy companies pay Enbridge a toll for their oil and gas to traverse that massive network to refineries, and storage facilities that can be hundreds, if not thousands of kilometres away. The business is recurring, stable and lucrative, not unlike a tollbooth operation on a highway.

While Enbridge’s pipeline network may be the envy of its energy peers, what makes Enbridge an even more compelling investment opportunity at the moment is the overall lack of pipelines. It seems as though we hear on a daily basis how Canadian crude is backlogged along limited capacity pipelines that are pushing energy prices on Canadian crude down to new levels.

In the case of Enbridge however, there’s an opportunity for further growth to help alleviate that backlog and add capacity. The company has over one dozen different pipeline projects currently in the queue that can only be valued in the billions, some of which are slated to come online within the next two years and begin contributing to Enbridge’s toll network.

As for the current backlog, energy companies have begun ramping up the use of transporting crude by rail for some short-term relief, but those efforts are just a temporary bandage at best, and won’t drive the price of Canadian crude up any further. The only viable long-term solution lies in opening up one or more new pipelines with a much greater capacity than the current network can provide.

Given that immense potential, it does beg the question as to why the stock is trading lower this year.

Enbridge announced the Spectra Energy deal a little over two years ago. The acquisition came at a high cost, and in doing so, Enbridge took on a lot of debt. That debt lowered cash levels and forced rating agencies to downgrade Enbridge’s credit rating, which subsequently led to a sell-off and decline in price.

Since then, Enbridge has been diligent in paying down that debt through a series of reorganizations, cuts and non-core asset sales. To date, the company has surpassed its own aggressive debt-targets for the year, thanks in part to strong earnings in the most recent quarter, which included an earnings beat of nearly 19%.

Much of that growth was attributed to new projects coming online, and as more of those pipeline projects I mentioned earlier come online over the next few years, investors should see further bumps in revenue and by extension, Enbridge’s dividend.

Should you buy?

Enbridge currently represents an incredible buying opportunity. The stock is favourably valued, if not at a discounted rate thanks to its large but decreasing debt load. The over 14% drop that the stock has registered in the past year alone has helped push its dividend yield up to an incredible 6.29% yield, which is astonishingly stable given that it accounts for just below 60% of cash flow.

In short, Enbridge is a great long-term opportunity with a mouth-watering dividend that investors should take advantage of. Buy it now and forget about it.

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Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. Enbridge is a recommendation of Stock Advisor Canada.

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