Enbridge (TSX:ENB) is a top Canadian pipeline operator I’ve pounded the table on for a long time — years, in fact.
And looking at the stock chart above, that call has certainly worked out for dividend investors and growth investors alike. Indeed, around the time of the pandemic, Enbridge’s yield popped into the high-single-digit range and stayed there for quite some time. The market believed the company would cut its dividend, given the economic pressures that were at play during that period of time.
That said, Enbridge has continued to power along, as the energy independence narrative continued to play out, and investors looked for ways to play what could be an increasingly insulated geopolitical environment around energy resources.
With a current dividend yield of almost exactly 5.9%, let’s dive into why I think this is a dividend investors would do well to lock in here.
Historical precedent matters
Enbridge has been one of the Canadian dividend stocks I’d put in the stalwart bucket, having raised its dividend for 30 consecutive years.
Now, the company’s overall dividend-growth rate has slowed to around 3% in recent years. And given that investors are currently getting an up-front yield of nearly 6%, that kind of small but meaningful dividend growth actually can add up, particularly over extended periods of time.
What I’ve found with true bond-like proxies such as Enbridge is that such companies are worth buying when the market beats down their share price (and their yield pops). That’s because Enbridge has proven its ability to maintain and grow its dividend in varying market environments, and I don’t see that changing anytime soon.
Growth opportunities could come
When most investors (and I’d include myself in this bucket) think of a company like Enbridge, I certainly don’t ascribe much in terms of growth to my own model around this stock.
However, with administrations north and south of the border seemingly looking to shore up energy capacity as AI and other power-hungry technologies surge in importance for the North American economy, I could see a future where additional pipeline approvals (which haven’t happened in many years) unfold.
Of course, we’ll have to see on this front. There’s risk to betting on growth with a mature company like Enbridge, and there’s always some risk of some sort of shock to the market that could put the company’s dividend at risk.
That said, in terms of the balance of risks and opportunities at play here, I think Enbridge looks like a great portfolio addition at current levels.
