1 High-Yield, Growth-Laden Investment for Your RRSP

Investors looking for a last-minute addition to their RRSP should strongly consider the massive potential of Enbridge Inc. (TSX:ENB)(NYSE:ENB).

| More on:
Glass piggy bank

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

On more than one occasion, I’ve mentioned the incredible potential for investors that Enbridge (TSX:ENB)(NYSE:ENB) represents for both income-seeking and long-term growth-seeking investors.

Let’s take a moment to talk some more about that opportunity for 2019 and beyond.

Enbridge: a lucrative business model

Most investors realize that Enbridge is an energy infrastructure company, but few may actually realize how significant that potential is over the long term. Enbridge is predominately known for operating the largest crude oil and liquids transportation system in the world with over 27,000 km of pipeline traversing North America. In total, those pipelines deliver 25% of all the crude in North America.

In addition to the crude oil pipelines, Enbridge is also one of the largest players in the transportation, storage, and processing of natural gas, with a stake in over 300,000 km of NGL pipelines across the continent, comprising 18% of all natural gas consumed in the U.S. Enbridge is also the largest natural gas distributor in Canada.

As incredible as those figures are, that’s only the beginning. Enbridge’s model is not unlike a toll booth, as the company earns revenue based on the volume traversing its network. This not only provides a recurring base of revenue for the company but is also incredibly secure given the immense size of the overall network and growing demand for both gas and crude.

If that weren’t compelling enough, Enbridge has billions in potential new pipeline, storage, and infrastructure projects that are either proposed or under construction around the continent that are set to come online over the next few years. By way of example, during 2018 Enbridge brought $7 billion worth of projects online. Other projects, such as the well-known Line 3 Replacement project, continue to meet project and construction milestones.

Another interesting point worth noting is Enbridge’s renewable energy segment. Despite being known primarily known as a pipeline company, Enbridge has a renewable energy segment that has geothermal, solar, and offshore wind elements that generate 1,750 MW of capacity between the assets in North America and Europe.

Strong earnings. Strong opportunity

A diversified, stable, and recurring source of revenue topped off with a lucrative portfolio of new construction projects is bound to make Enbridge popular during earnings season. The company announced results for the most recent quarter last week which were impressive.

GAAP earnings for the quarter came in at $1,089 million, or $0.60 per common share, representing a massive improvement over the $207 million, or $0.13 per common share, reported in the same quarter last year.

Adjusted EBITDA came in at $3,320 million, highlighting a $357 million improvement over the same quarter last year, while distributable cash flow came in at $1,863 million, handily beating the $1,714 million reported in the same quarter last year.

Should you buy now?

For the past two years, many investors have avoided Enbridge owing to the financial cost the company incurred after its acquisition of Spectra. The deal greatly expanded Enbridge but came at a massive cost in terms of debt, which weighed heavily on the company’s balance sheet and resulted in Enbridge receiving a downgrade in its credit rating.

That downgrade pushed the stock significantly lower, with many investors disregarding that long-term potential. If you’re one of the many investors that bought into Enbridge after that dip, you’ve already seen a healthy bump in the share price, which has risen 11% over the past 12-month period.  Fortunately, there’s still ample opportunity and potential for the stock to go higher.

Finally, there’s Enbridge’s dividend. The current quarterly distribution provides an appetizing 6.23% yield, which has not only been subject of hikes over the years but is also one of the highest yields on the market. In the quarterly update last week, Enbridge announced a 10% hike to its dividend for 2019.

In my opinion, Enbridge appeals to both income- and growth-focused investors, making it a core holding candidate for nearly any type of portfolio.

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

More on Dividend Stocks

exchange-traded funds
Dividend Stocks

2 Dividend ETFs With Significant Exposure to the TSX’s Top 2 Sectors

Two dividend ETFs offer ideal diversification because of their exposure to the TSX’s two strongest sectors.

Read more »

Illustration of bull and bear
Dividend Stocks

3 Top ETFs Canadians Can Buy Amid a Bear Market

Monthly dividend-paying ETFs allow investors to generate a stable stream of recurring income, making them ideal bets in a volatile…

Read more »

Oil pipes in an oil field
Dividend Stocks

3 Dividend-Paying TSX Energy Stocks for TFSA Investors

TSX energy stocks will likely continue to beat broader markets!

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

3 Fantastic Stocks for Young Investors

You are never in a better position to be daring with your investment than early on in your life. But…

Read more »

data analyze research
Dividend Stocks

1 Investment Strategy That Works in a Higher-Rate Environment

Market analysts say that dividend investing is back in style and a winning strategy in a higher-rate environment.

Read more »

Dividend Stocks

Top 3 REITs That Are Yielding Over 3%

Canadian real estate investment trusts such as Dream Industrial offer you the opportunity to benefit from a steady stream of…

Read more »

Target. Stand out from the crowd
Dividend Stocks

Beginner Investors: 1 Top Dividend Stock Pick to Buy for Stagflation

Fortis (TSX:FTS)(NYSE:FTS) is a great dividend stud to buy and hold through stagflationary, recessionary, or inflationary times.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Tax-Free Passive Income: 2 Oversold TSX Dividend Stocks for TFSA Investors

These top TSX dividend stocks look cheap to buy today for TFSA investors focused on passive income.

Read more »