Canadian investors are searching for reliable dividend stocks to add to their self directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolios focused on generating rising income and long-term total returns.
In the current market environment, it makes sense to seek out industry leaders that have shown an ability to adjust to changes in their sectors.
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Enbridge
Enbridge (TSX: ENB) is a giant in the Canadian and American energy infrastructure industry with a current market capitalization of roughly $140 billion. The stock is down about 10% from its 12-month high.
The company’s historical growth came from the construction of large oil and natural gas transmission infrastructure in Canada and the United States. Enbridge moves about a third of the oil produced in the two countries and transports around 20% of the natural gas used in the United States.
Opposition to the construction of new major pipelines forced Enbridge to pivot its growth strategy in recent years. The company expanded into exports through the acquisition of a large oil export terminal in Texas. In Canada, Enbridge is a partner on the Woodfibre liquified natural gas (LNG) export facility being built on the coast of British Columbia. International demand for North American energy is rising, particularly natural gas, as countries seek out reliable supplies from stable production sources.
Enbridge has also moved deeper into the utility sector through its US$14 billion purchase of three natural gas utilities in the United States in 2024. The deal made Enbridge the largest operator of natural gas distribution utilities in North America. These assets, when combined with the existing natural gas transmission and storage infrastructure, position Enbridge to benefit from the anticipated growth in natural gas demand as new gas-fired power generation facilities are built to supply power for AI data centres.
On the renewables side, Enbridge purchased the third-largest American solar and wind project developer. The deal bulked up the renewables division that now has projects in North America and Europe.
Opportunities
The diversification of the asset base has opened up new growth opportunities across the company. Enbridge currently has a $35 billion capital program on the go that will steadily raise adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as well as distributable cash flow in the next few years.
Canada’s focus on finding ways to reduce reliance on the United State for energy sales could potentially lead to the construction of a new oil pipeline from Alberta to the coast. If that materializes, Enbridge would potentially be a partner on the project, given its expertise in the sector.
Risks
The flow of oil from Canadian producers to refineries on the American Gulf Coast could decline in the next few years if Venezuela increases its output, as is planned by the American government. This would likely have an impact on volumes that move through Enbridge’s system. Investors will want to keep an eye on updates from the company related to this topic. In recent months Enbridge announced a plan to expand pipeline capacity heading into the American market.
Dividends
Enbridge raised the dividend in each of the past 31 years. The expected growth in distributable cash flow should support ongoing dividend increases. Investors who buy ENB stock at the current price can get a dividend yield of 6%.
The bottom line
Near-term volatility is expected, but buy-and-hold dividend investors should be comfortable owning Enbridge at this level. You get paid well to ride out turbulence and dips would be opportunities to add to the position.
