2 Reasons Why Enbridge Stock Remains a Buy in August 2021

Here’s why I think long-term investors ought to consider Enbridge (TSX:ENB)(NYSE:ENB) stock today.

| More on:

Investors in Enbridge (TSX:ENB)(NYSE:ENB) stock certainly have a lot to like today. This energy infrastructure company has continued to perform well, despite recent market turbulence this year. Indeed, where the stock market goes from here is anyone’s guess. However, this key dividend player is one that has shown the ability to provide consistent long-term returns for investors. Usually, that’s good enough for me.

However, there happen to be a couple key catalysts I think could take Enbridge stock on nice run from here. Let’s dive into why I think this could be a great pick for August and beyond.

Line 3 pipeline replacement to be functional soon

All eyes for investors in Enbridge stock are on the company’s Line 3 replacement project. Indeed, this $9.3 billion project is slated to be operational this year. And the cash flows this pipeline expansion will provide should give investors the boost they’re looking for in this stock.

This will be the first major Canadian energy infrastructure project to be completed in some time. Additionally, many pundits believe this may be one of the last. ESG-related concerns with the energy sector have led to a political environment which isn’t friendly to companies like Enbridge. However, Enbridge is well positioned relative to its peers on the completion of this project.

Delays with respect to the company’s Line 3 expansion have cost the company significantly. Experts estimate the entire sector lost $17 billion over the past five years as a result of this unfavourable political environment. However, Enbridge’s Line 3 project stands as a beacon of hope for energy investors today. Accordingly, I view Enbridge as one of the safest plays in this sector right now.

This pipeline expansion allows for an additional 370,000 barrels of oil to be transported daily to the United States. Given the completion date of Q4, this pipeline should be accretive starting next quarter. For investors looking to get in early, now may be a great time to pick up Enbridge stock.

Of course, risks still persist. There’s no telling if another slowdown in construction may materialize. However, for now, the stars appear to be aligning for Enbridge. Accordingly, this is a stock I think investors should at least have on their watch list today.

Strong earnings boosting Enbridge stock

The Calgary-based pipeline company has posted impressive earnings of late. Enbridge’s revenues grew nearly 14% year over year to $10.9 billion this past quarter. Given the company’s market capitalization just under $100 billion, it’s easy to see why Enbridge stock is viewed as cheap right now.

The company’s 6.9% dividend yield is among the highest in the sector. However, I view this dividend also as one of the best in its class. This is because Enbridge’s cash flows are extremely stable and are likely to grow as a result of the Line 3 expansion. From a fundamentals standpoint, Enbridge stock ticks all the boxes.

Enbridge beat on the bottom line this past quarter — something I think will become commonplace moving forward. With oil prices still above US$60 per barrel, counterparty risk has been significantly reduced. Accordingly, I think Enbridge stock looks attractive from a forward-looking earnings perspective as well.

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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

analyze data
Dividend Stocks

Top Financial Sector Stocks for Canadian Investors in 2025

From undervalued to powerfully bullish, quite a few financial stocks might be promising prospects for the coming year.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

3 TFSA Red Flags Every Canadian Investor Should Know

Day trading in a TFSA is a red flag. Hold index funds like the Vanguard S&P 500 Index Fund (TSX:VFV)…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

1 Magnificent Canadian Stock Down 15% to Buy and Hold Forever

Magna stock has had a rough few years, but with shares down 15% in the last year (though it's recently…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Earn Steady Monthly Income With These 2 Rock-Solid Dividend Stocks

Despite looming economic and geopolitical uncertainties, these two Canadian monthly dividend stocks could help you generate reliable income in 2025…

Read more »

A worker gives a business presentation.
Dividend Stocks

2024’s Top Canadian Dividend Stocks to Hold Into 2025

These top Canadian dividend stocks are worth holding into 2025 to generate steady and growing passive income.

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Magnificent Canadian Stock Down 12% to Buy and Hold Forever

This top stock may be down 12% right now, but don't see that as a problem. See it as a…

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $625 Per Month?

This retirement passive-income stock proves why investors need to always take into consideration not just dividends but returns as well.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Secure Your Future: 3 Safe Canadian Dividend Stocks to Anchor Your Portfolio Long Term

Here are three of the safest Canadian dividend stocks you can consider adding to your portfolio right now to secure…

Read more »