When it comes to investing in Canada, there’s no question that Enbridge (TSX:ENB), the massive $125 billion energy infrastructure company, is one of the best-known dividend stocks among investors and, for years, has been one of the top dividend growth stocks to buy and hold for the long haul.
The fact that Enbridge offers such an attractive dividend, with a current yield of more than 6.4%, is certainly one of the main reasons why it’s so well known. However, this is not the only reason why Enbridge is one of the most popular dividend stocks to buy among Canadian investors.
Another reason why it’s one of the top dividend stocks on the TSX is that Enbridge has an incredibly well-diversified and important business that provides essential services all over North America.
So, here’s why Enbridge is one of the best dividend stocks you can own for the long haul and whether or not it’s worth a buy at today’s prices.
Why is Enbridge one of the best dividend stocks you can buy?
First off, Enbridge is a massive company with a dominant position in an essential industry with significant barriers to entry. This gives it an important competitive advantage and makes it an incredibly robust and reliable business that you can have confidence in owning for years to come.
In fact, Enbridge’s pipeline network is one of the largest in North America, with connections to key markets such as refineries and export hubs. This geographic advantage makes its infrastructure highly valuable to shippers who want reliable and direct access to these premium destinations.
So even with the significant barriers to entry in the pipeline industry – such as regulatory hurdles, environmental concerns, and high capital costs – any new entrant would still face the challenge of competing with Enbridge’s well-established, strategically located network.
Plus, as mentioned earlier, the services it provides are essential, ensuring that the demand for its services and the cash flow it generates are both sticky. This is why Enbridge is one of the most reliable dividend stocks in Canada and one of the best to buy and hold long term.
Additionally, another reason why Enbridge is one of the top dividend stocks to buy in Canada is all the long-life assets it owns. By owning assets that generate tonnes of cash flow each day yet hardly need any maintenance year over year, Enbridge’s business model allows it to constantly generate significant cash flow.
Plus, since the stock is constantly earning billions in cash flow, the company can increase its dividend payments each year and still have cash left over to invest in expanding its operations, which ideally will lead to more dividend growth down the road.
For example, in 2024, Enbridge estimates it will generate roughly $12 billion in cash flow, of which roughly half will be used to fund the dividend, with the rest going partially to maintenance and the remaining spent on new growth opportunities.
In addition, it’s worth noting that Enbridge’s payout ratio is easily sustainable, and its dividend growth streak sits at an impressive 29 straight years, demonstrating what a high-quality business it is.
So, there’s no question that Enbridge is one of the best stocks you can buy. The question is whether it’s worth buying today at its current valuation.
Is the energy giant worth buying today?
With interest rates on the decline, Enbridge stock has been rallying lately. However, even with the stock gaining value recently, it still appears to be worth buying today, especially for the long haul.
For example, right now, Enbridge trades at a forward price-to-earnings (P/E) ratio of 19.3 times, which is below its 10-year average forward P/E ratio of 19.7 times.
Furthermore, its forward enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) ratio is just 11.9 times today. That’s cheaper than its 10-year average EV/EBITDA ratio of 12.9 times.
Finally, its forward dividend yield of 6.4% today is not only attractive, but it’s also above Enbridge’s 10-year average of 6%, showing that the stock offers investors value today.
So, if you’re thinking of adding Enbridge to your portfolio, it’s certainly one of the best dividend stocks Canadians can buy, especially if you plan to hold it for decades to come.
