Most investors are aware of how lucrative an investment option Enbridge (TSX:ENB) is. More specifically, most investors are aware of Enbridge’s juicy dividend. But is that enough? Should you buy Enbridge stock for its insane yield?
Let’s try to answer that question.
First, an introduction
As I mentioned, most investors are aware of what Enbridge does. That being said, prospective investors may not realize how connected the energy infrastructure behemoth is to different segments of the market.
Enbridge is best known for its lucrative pipeline network, and there’s a good reason for that. The company hauls massive amounts of crude and natural gas along its vast pipeline network. That network, which happens to be the largest and most complex system on the planet, generates the bulk of the company’s revenue.
In terms of volume, Enbridge transports one-third of North American-produced crude. The company also hauls nearly one-fifth of the natural gas consumed by the United States. Suffice it to say, there’s a massive moat around Enbridge’s core business, making it a great investment option.
But that’s not all the company does.
Enbridge also operates a growing renewable energy business. The company has invested over $8 billion into the segment over the past two decades. Today, the segment comprises over 40 renewable energy facilities located across Europe and North America.
Collectively, those facilities (which include solar, wind and geothermal elements) have a net generating capacity of over 2,300 megawatts. That’s enough to power over 1.1 million homes.
Beyond renewables, Enbridge also operates the largest natural gas utility in North America. The utility business serves nearly seven million customers, hauling 9.3 billion cubic feet of natural gas each day.
In other words, Enbridge is a massive energy infrastructure company that offers a massive defensive moat.
Enbridge offers a juicy income
One of the primary reasons why investors continue to flock to Enbridge is for the massive dividend that the company offers. As of the time of writing, the yield on Enbridge’s quarterly dividend works out to an insane 7.65%. That handily makes it one of the best-paying dividends on the market.
Prospective investors who drop $40,000 into Enbridge (as part of a larger, well-diversified portfolio) can expect to generate an income of over $3,000 in just the first year.
The reason I say first year is because Enbridge has an established history of providing annual upticks to that dividend for three decades. Enbridge has also planned to continue that tradition over the next several years.
And keep in mind that investors who aren’t ready to draw on that income can choose to reinvest it until needed. This allows any eventual income to grow further.
Should you buy Enbridge stock for its yield?
Investors should never consider a stock solely on its yield. Fortunately, in the case of Enbridge, the company has much more to offer investors than a shiny 7.65% yield.
Enbridge offers a wide defensive moat and significant growth appeal across multiple segments in addition to that juicy yield.
In my opinion, Enbridge is a great long-term investment that should be a core holding in any well-diversified portfolio.
