Canadians: 2 Reasons Enbridge (TSX:ENB) Stock Is a Steal Today

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and other energy stocks have been pummeled in 2020, but there are positive signs ahead as we kick off the month of May.

| More on:
Pipeline

Image source: Getty Images

The COVID-19 pandemic and the subsequent lockdowns have had a devastating impact on the Canadian and global energy sector. Oil and gas demand have sharply plunged, as citizens all over the world have been grounded in one way or another. Predictably, this has had a negative impact on energy stocks. Today, I want to discuss why the energy infrastructure giant Enbridge (TSX:ENB)(NYSE:ENB) is a worthy pick in the month of May.

Enbridge is a dividend beast with nice value

In late 2019, I’d targeted Enbridge as one of my top dividend stocks entering this new decade. The company possessed a wide economic moat and a deep project pipeline. Moreover, it has a fantastic track record as a dividend payer.

Enbridge last paid out a quarterly dividend of $0.81 per share. This represents a tasty 7.5% yield. A dividend hike in 2020 will mark 25 consecutive years of dividend growth at Enbridge. It has achieved a forward dividend-growth rate of 6.3%. This is a mouth-watering rate for income investors. When it comes to yield, dividend-growth history, and company quality, there are few dividend stocks that can measure up to Enbridge on the TSX.

Better yet, Enbridge also offers good value right now. The stock has dropped 21% over the past three months as of close on May 5. Shares are down 6.3% year over year. The stock last had a favourable price-to-earnings ratio of 16 and a price-to-book value of 1.5. It was still trading at the low end of its 52-week range at the time of this writing.

Enbridge is set to release its first-quarter 2020 results tomorrow on May 7. Investors should consider its good value right now, while also bracing for turbulence in the near term.

Don’t count out the Canadian energy sector

In late April, I’d pinpointed three Canadian energy stocks that were on the path to rebounding in 2020. Enbridge was not among those targeted, but it can benefit from the same trends going forward.

Canada’s oil and gas sector has taken its lumps so far in 2020, but there is light at the end of the tunnel. One of the main culprits of the volatility was the Saudi-Russia price war and instability at OPEC. There are still underlying tensions, but both parties have been able to agree on sharp production cuts going forward.

The other half of the equation for energy stocks has been the COVID-19 pandemic. This outbreak has rattled governments all over the world. Many nations elected to pursue strict lockdowns to contain the pandemic. This has resulted in an unprecedented fall in demand for the oil and gas sector. Governments around the world are now exploring a gradual re-opening while expending massive financial resources on searching for a viable vaccine.

This process may be slow, but demand in the oil and gas sector should gradually recover in the months to come. Enbridge and other energy giants will be the beneficiaries of this path to normalization.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Energy Stocks

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

energy industry
Energy Stocks

2 TSX Energy Stocks to Buy Hand Over Fist Now

These two rallying TSX energy stocks can continue delivering robust returns to investors in the long term.

Read more »

green energy
Energy Stocks

1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

Read more »

oil tank at night
Energy Stocks

3 Energy Stocks Already Worth Your While

Here's why blue-chip TSX energy stocks such as Enbridge should be part of your equity portfolio in 2024.

Read more »

Solar panels and windmills
Energy Stocks

1 Beaten-Down Stock That Could Be the Best Bet in the TSX

This renewable energy stock could be one of the best buys you make this year, as the company starts to…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Here's why Enbridge (TSX:ENB) remains a top dividend stock long-term investors may want to consider, despite current risks.

Read more »

Gas pipelines
Energy Stocks

If You Had Invested $5,000 in Enbridge Stock in 2018, This Is How Much You Would Have Today

Enbridge's high dividend yield hasn't made up for its dismal total returns.

Read more »

Bad apple with good apples
Energy Stocks

Avoid at All Costs: This Stock Is Portfolio Poison

A mid-cap stock commits to return more to shareholders, but some investors remember the suspension of dividends a few years…

Read more »