With no shortage of macroeconomic jitters and a series of aggressive key interest rate hikes by central banks in Canada and the US, the stock market remained volatile throughout 2023. Toward the end of the year, cooling inflation opened up the possibility of interest rate cuts being enacted sooner than anticipated.
That factor led to a 12.4% rally for the S&P/TSX Composite Index between October 27, 2023 and January 15, 2024. The Canadian benchmark index has since dropped by 1.5% at the time of writing. The development came in light of the Federal Reserve Governor announcing that the US Federal Reserve will indeed cut its benchmark interest rate, but much slower than Wall Street hoped and anticipated.
Equity markets will likely remain volatile this year due to monetary tightening measures impacting the global economy. Considering that outlook, investors would be wise to strengthen their self-directed portfolios through high-quality dividend stocks.
The right picks that generate stable cash flows, high-yielding dividends, and track records for dividend growth can be good picks. Enbridge Inc. (TSX:ENB) is a TSX stock that arguably fits the bill.
Today, we will take a closer look at the stock to help you determine whether it can be a good holding for your portfolio this month and beyond.
Enbridge stock
Enbridge is a $102.6 billion market capitalization diversified energy company transporting oil and natural gas throughout North America. Besides transporting a significant portion of the crude oil and natural gas consumed in North America, it also has exposure to natural gas utility, storage, and renewable energy businesses in the region.
While cash flows for energy stocks typically fluctuate by substantial margins due to the cyclical nature of the market, this company’s business model prevents much of it.
The company generates almost all of its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) through contracted and cost-to-service assets. It means that its financials are not strictly tied to commodity prices. Additionally, much of its adjusted EBITDA is indexed to inflation, providing further protection for its financial performance.
Outlook in 2024 and beyond
Enbridge stock reported 3% year-over-year growth in its adjusted EBITDA in its recently published third-quarter earnings report. The company’s liquid pipeline and renewable power segments growth also offset its declining midstream, gas distribution, and gas transmission segments.
Additionally, Enbridge signed agreements with Dominion Energy to acquire three different utility companies based in the US. Adding more utility businesses under its belt will likely contribute to higher and more stable cash flows. With these acquisitions set to be complete by the end of this year, the company’s prospects for growth and stability seem secure.
Foolish takeaway
As of this writing, Enbridge stock trades for $48.29 per share. At these levels, it is down by 14.2% from its 52-week high and pays its shareholders at an unusually high 7.58% dividend yield. Enbridge has a solid underlying business and boasts an expected improvement in its cash flow stability and strong long-term growth prospects.
Given these factors, it can be an excellent investment to consider for your self-directed portfolio.
