As the global economy faces increasing uncertainty and the possibility of a recession looms, investors are understandably concerned about the best stocks to buy for their portfolios. During such times, it’s crucial to seek out resilient companies with solid fundamentals, strong cash flow, and a history of weathering economic downturns. Enbridge (TSX:ENB) is such a stock.
Enbridge is a leading North American energy infrastructure company known primarily for its massive pipeline operations, impressive cash flow, and attractive dividend yield.
Therefore, it’s no surprise why it’s such a popular investment, especially for investors who are looking to protect their portfolios when the economy is on the verge of a potential recession.
Enbridge’s diversified business model, stable cash flow, and impressive dividend growth streak make it an appealing investment option for those seeking a defensive stock to buy during uncertain times.
So, if you’re concerned about the economic outlook and are looking for high-quality stocks that you can have confidence buying, here’s why you’ll want to consider Enbridge stock for your portfolio.
Enbridge stock provides essential services
As with any high-quality business, one of the first and foremost reasons why Enbridge is such a worthy and reliable stock to buy is that it operates in a defensive industry. ENB’s energy infrastructure services are essential to the North American economy.
Furthermore, it has several operating segments, which diversify the cash flow it earns. This diversification helps to make Enbridge an even more resilient business.
For example, it transports up to 30% of the crude oil produced in North America and roughly 20% of the gas consumed in the United States. In addition, the pipeine operator owns a massive utility business. Plus, on top of these stable business, Enbridge has a rapidly growing green energy portfolio.
So even if there is a slowdown in the economy, Enbridge’s defensive operations give it substantial resiliency.
Enbridge’s business model allows it to earn tonnes of cash flow
Another reason why Enbridge is such a formidable stock that can be relied upon through a recession is because its business model allows it to earn tonnes of cash flow each year.
Not only does it provide essential services, but many of the assets it owns, such as pipelines, are long-life assets, meaning they require only minimal maintenance.
This allows Enbridge to earn billions in cash flow each year. For example, in 2022 alone, Enbridge earned more than $11 billion in cash from operations and $6.5 billion in free cash flow.
Having the ability to earn tonnes of cash flow is a major reason why Enbridge stock is such a top-notch investment. Importantly, it can continue to invest in growing the business each year in addition to constantly increasing the capital it’s returning to investors.
Enbridge stock offers an attractive dividend yield and impressive dividend growth
Lastly, one of the most significant reasons why Enbridge is such a popular investment is due to the impressive dividend it offers.
Right now, Enbridge stock has a yield of more than 7%. Thus, ENB is ideal for investors looking to shore up their portfolios ahead of a recession.
Seven percent is a significant return. And in addition to the incredible dividend yield it offers, Enbridge has also increased its dividend annually for 27 straight years.
So if you’re worried about the potential of a recession materializing and want to shore up your portfolio, Enbridge is easily one of the best stocks to buy for your portfolio today.