Enbridge (TSX:ENB) is among the most popular dividend stocks in Canada. The Canadian energy infrastructure giant pays investors an annual dividend of $3.66 per share, which translates to a forward yield of 6.7%. Moreover, the company has raised these payouts at an annual rate of 10% (on average) since 1995, enhancing the effective yield significantly.
In the last 30 years, ENB stock has returned 1,400% to shareholders. However, if we adjust for dividend reinvestments, cumulative returns are much higher at 5,450%.
Is Enbridge stock still a good buy?
As historical returns don’t matter much to current and future shareholders, let’s see if Enbridge stock is still a good buy at the current valuation. Enbridge owns and operates a diversified portfolio of cash-generating assets. Around 98% of its cash flows are contracted, and 80% of its EBITDA has inflation-linked protections.
Despite a challenging macro environment, Enbridge reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.33 billion in the second quarter (Q2) of 2024, up from $4 billion in the year-ago period. Its distributable cash flow per share stood at $3.86 billion or $1.34, indicating a payout ratio of 68%, which is sustainable as it provides Enbridge with the flexibility to reinvest in acquisitions and reduce balance sheet debt.
Last year, Enbridge announced plans to acquire three natural gas utilities from Dominion Energy for $19 billion. The acquisitions are forecast to be completed by the end of 2024, providing Enbridge with more stable cash flow generation and lower risk compared to its existing profile.
Enbridge expects to invest roughly $8 billion each year in capital expenditures which should drive its future cash flows and dividends higher. While Enbridge offers you an attractive dividend yield, it will unlikely deliver substantial capital gains in the future. Here’s another cheap dividend stock you can buy instead of Enbridge.
Is Secure Energy Services stock undervalued?
Valued at $3 billion by market cap, Secure Energy Services has grown its revenue by 17.8% annually in the past ten years, while adjusted earnings have risen by 15.9%. Despite its stellar returns, the TSX energy stock has been down 55% since September 2014, allowing you to buy a quality company at a discount.
Secure Energy provides solutions to upstream oil and natural gas companies in Canada and the United States. Its midstream infrastructure business provides services, including pipeline transportation, oilfield waste processing, crude oil pipelines, and landfills, among others. It also has an environmental and fluid management business that is involved in hazardous and non-hazardous waste management and disposal, as well as fluid management for drilling.
Secure Energy Services pays investors an annual dividend of $0.40 per share, suggesting a yield of 3.34%. In the last 12 months, Secure Energy has reported a free cash flow of $249 million, indicating a payout ratio of less than 40%.
Bay Street analysts expect Secure Energy to grow its adjusted earnings from $0.65 per share in 2024 to $0.82 per share in 2025. Priced at 14 times forward earnings, SES stock is quite cheap and trades at a discount of 22% to consensus price target estimates in September 2024.
