Diversification is a recommended investment strategy for investors when the future is uncertain. You spread out the risks when your portfolio consists of assets like bonds and stocks. If you’re investing in the stock market, fill your basket with equities across a variety of sectors.
Since each sector reacts differently to economic events, you mitigate the risks while maximizing returns. Furthermore, diversification protects you from taking a big hit when unforeseen circumstances like a pandemic happen. Hence, a single stock in a portfolio isn’t advisable in modern portfolio theory. However, if there’s a foolish rule in 2021 that says you can only invest in one stock, which stock is best to buy and hold forever?
The name to count on
The energy sector is among the most volatile sectors in the COVID-19 era. Low commodity prices add to the heightened volatility. Ironically enough, a $70.54 billion energy infrastructure company stands out as the top pick for risk-averse investors. You can purchase Enbridge (TSX:ENB)(NYSE:ENB) today and hold it forever.
Enbridge was collateral damage in 2020 following a 13.6% loss on the stock market. However, it’s still the name to count on despite the worst downturn in a generation. Many oil and gas companies also went bankrupt in the U.S., according to the Houston Chronicle.
Al Monaco, Enbridge’s president and CEO, has reassuring words to investors. He said, “Over the decades, Enbridge has delivered superior shareholder value. Our low-risk business model has resulted in strong and consistent growth in the dividend which we are continuing to deliver.”
Enbridge’s value proposition is crystal clear. The company has the best-in-class infrastructure franchises and a strong balance sheet. There’s resiliency and longevity of cash flows, while the investable free cash flow is growing. The long-term growth outlook is transparent. Finally, Enbridge leads the way in the transition to renewable power.
Enbridge’s liquids pipeline network transports 25% of North America’s crude oil requirements. Its natural gas transmission takes care of 20% of total consumption in the U.S. The company’s natural gas distribution utility assets are also the largest in the region, while the contracted renewable energy asset is now the 12th largest.
Enbridge has four platforms to meet the ever-increasing global demand for energy. Regardless of market cycles, the business model will remain low risk and resilient. The main thrust in the near term or through 2023 is to enhance returns from existing businesses.
The goal is achievable because it will execute its $11 billion secured capital program. Beyond 2023, management looks to pursue organic opportunities through expansion, extension, or new building of utility assets. Permitting and regulatory issues are perennial challenges.
Dividend Aristocrat status
Enbridge is a Dividend Aristocrat owing to its 26-year record of dividend growth. From 1995 to 2021, common shares grew at a 10% compound annual growth rate (CAGR) clip. It demonstrates management’s commitment to reward or return capital to shareholders consistently.
As of January 25, 2021, you can purchase Enbridge at $34.58 per share and partake of the generous 7.53% dividend. If you use the Rule of 72 formula, any amount of investment will double in nine-and-a-years. Market analysts forecast the stock to climb by 41.7% to $49 in the next 12 months. If I were you, I’d invest in Enbridge.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.