It’s no secret that the stock market offers investors a myriad of choices for how they want to form their portfolios. Whether you prefer high-growth stocks, value stocks, or even dividend stocks, there are a tonne of choices for investors to consider when building the right portfolio for your goals. With that being said, though, one stock that basically every investor can consider is Enbridge (TSX:ENB).
Enbridge is an excellent stock to consider for several reasons. First, it’s massive, with a current market cap north of $100 billion. In addition, its operations are essential to the North American economy, making it an excellent defensive stock.
Furthermore, because it’s constantly earning billions of cash flow and returning tonnes of that cash to investors through its significant dividend, Enbridge is an ideal core portfolio stock to buy and hold for years.
As with any stock, though, the cheaper you can buy it, the more long-term potential it offers. So, with that in mind, let’s look at how cheap Enbridge stock is trading today and whether or not it’s worth an investment.
How cheap is Enbridge stock?
At the time of writing, Enridge is currently trading at $47.60, roughly 14% off its 52-week high. That may not seem like such a significant discount, but for a well-known and defensive stock like Enbridge, which is typically less volatile than the broader market, it’s certainly worth considering.
Looking deeper into the value of Enbridge stock, we see that it’s currently trading at a forward price-to-earnings (P/E) ratio of 16.7 times. That’s below both its five- and 10-year average forward P/E ratios of 17.6 and 20.2 times, respectively.
In addition, its forward enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio is just 10.65 times today. That’s also below its five- and 10-year average forward EV/EBITDA ratios of 12.3 and 13.2 times, respectively.
Finally, its forward dividend yield of roughly 7.8% is not only attractive but also shows that Enbridge stock is undervalued. In fact, over the last five years, Enbridge’s forward dividend yield has averaged just 7%. Furthermore, if you go back 10 years, the average forward dividend yield is just 5.8%.
This shows that Enbridge is certainly undervalued. It may not trade at the biggest discount on the market. However, considering its size, reliability and status as a Canadian Dividend Aristocrat, with more than a quarter century of consecutive dividend increases annually, any time Enbridge stock trades undervalued, it’s certainly one of the top stocks to consider adding to your portfolio.
Is the energy infrastructure stock worth buying today?
An attractive discount is certainly a prerequisite to buying high-quality stocks, but it’s not the only factor. It’s also essential to ensure that the stock you’re looking to buy is high-quality and that you have confidence in its ability to grow and weather economic downturns over the long haul.
In Enbridge’s case, the stock has a tonne of positives, showing why it’s one of the best long-term dividend stocks to consider on the TSX.
First, as I mentioned above, Enbridge’s operations are crucial to the North American economy. Among other things, Enbridge transports roughly 30% of all the crude oil produced in North America and roughly 20% of all the natural gas consumed in the U.S.
So, its core business is extremely defensive, one of the main reasons why you can continue to count on Enbridge generating billions in cash flow each quarter and constantly paying out as well as increasing its dividend.
Going forward, Enbridge expects its earnings per share to continue growing at 4-6% annually over the next three years, which is essentially in line with its previous guidance.
That’s not only a positive sign that its consistent growth will continue, especially in a higher interest rate economic environment, but it also shows the stability of its operations and reminds us why it’s one of the best and most reliable dividend stocks on the TSX.
So, if you’re looking to add Enbridge stock to your portfolio today, it’s undoubtedly one of the best core portfolio stocks that Canadian investors can consider.
