Not all investors keep track of their portfolios the same way. Some make regular changes and “rebalance” the portfolio their way to ensure it’s in line with their investment goals. Others, the more buy-and-forget type of investors, check their investment occasionally or when they hear compelling news about the companies they have invested in.
You may think that one type is characteristically better than the other, but ironically, it’s not. Even though it’s a good idea to keep a regular check on your investment, frequent evaluation sometimes triggers hasty decisions, like selling a company that’s just going through a rough phase, while its long-term prospects are still the same. So even if you are in the habit of frequently checking on your investments, always keep the long-term prospects in mind.
For dividend investments, investors are more interested in financials and quarterly earnings than the stock’s movement. But one bad quarter is not a trend in the making, and conversely, one exceptional quarter is not a signal to buy more.
Enbridge’s powerful quarter
Enbridge (TSX:ENB)(NYSE:ENB), the energy giant of Canada and one of the energy transportation giants in North America, finished 2021 on a solid note, considering its year-end earnings. The GAAP earnings were $5.8 billion for the year, almost double that of 2020 ($3 billion) and an improvement over the last “normal” year, i.e., 2019, when the GAAP earnings were about $5.32 billion.
Several other financials saw decent growth. The bulk of the revenue came from the mainline system (crude oil transportation). The gas transportation revenue actually dropped from 2020, but only by a small margin. Renewable power generation revenue increased slightly, but it still makes up a tiny portion of the total income.
All in all, the financials are promising, and Enbridge investors, most of whom are likely in it for the dividends, can rest easy knowing that their income is backed by strong financials.
The dividend hike
The company raised its payouts for 2022 by 3%. It’s the same $0.25 raise that the 2021 dividends got compared to the 2020 payouts, and the company actually spelled out the rationale behind it. A conservative raise is more likely to attract investors than substantial and sometimes financially “daring” dividend raises.
A 3% raise may not be enough to outpace inflation nowadays, but when the economy settles down, it might just be enough. Its strong 6.5% yield is enough to attract investors, especially now that the payout ratio is significantly more stable than it was in 2020. The current valuation is also quite attractive.
When it comes to dividend stocks like Enbridge, keeping an eye on quarterly reports is a good idea. Still, it’s essential to understand the difference between one excellent or poor quarter and a financial trend. However, you should be more careful with smaller dividend payers since danger signs for giants like Enbridge will be pretty apparent, and you won’t have to dig through the fine print to find them.