If you’re looking for dividend stocks that have a shot at soaring in 2026, you’ve got your work cut out for you.
Most types of stocks have been doing very well this year – even oil stocks, which have been lagging for most of the last 10 years. The War in Iran and closure of the Strait of Hormuz have taken oil prices to unusual highs, resulting in strong year-to-date performances from some stocks whose names might surprise you. The corollary of this is that strong future performance might be hard to come by. Nevertheless, pockets of value – and income – exist. In this article, I’ll explore one oil stock that may have legs, and which has a 4.9% dividend yield at today’s price.
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Enbridge
Enbridge Inc (TSX:ENB) is a Canadian energy stock with a 4.9% dividend yield. The entity that the stock confers ownership in is a Canadian oil pipeline company that owns several of the most vital pieces of energy infrastructure on the North American continent. Its pipeline network spans over 5,000 kilometres and has the capacity to ship 3 million barrels of oil per day. The pipeline operator does more than $69 billion in annual revenue and has more than $41 billion in common equity. It supplies 75% of Ontario’s natural gas. Put simply, it’s an economically indispensable company. There are not very many companies like Enbridge that can move crude oil all over North America, and many attempts at building new ones have ended up getting cancelled – whether that’s a good thing for the world or not, it’s been a good thing for Enbridge, which has a very strong competitive position in North American energy infrastructure.
Decent growth
Enbridge has been doing a decent amount of growing in recent years. In its most recent 12-month period, it grew its revenue, operating earnings, and earnings per share (EPS) at the following rates:
- Revenue: 13%.
- Operating earnings: 3%.
- EPS: 9.1%.
The growth was similarly strong over the last three years, with numbers (in this case compounded annual (CAGR)) as follows:
- Revenue: 11%.
- Operating income: 9.6%.
- EPS: 35.7%.
The earnings growth in this period has been truly phenomenal. It would appear that organizations across North America continue to demand Canadian crude in large volumes, and see Enbridge as the best place to get it from.
Stellar profitability
In addition to having done stellar growth in recent years, Enbridge has also been reasonably profitable. In the trailing 12-month period, it delivered the following profitability metrics:
- Gross margin: 39%.
- Operating margin: 16.5%.
- Net margin: 10%.
These metrics indicate that Enbridge is profitable, growing, and thriving.
Some warning signs about dividend sustainability
One issue about Enbridge is its dividend payout ratio. Quite frankly there are signs it’s not in the sustainable range. According to signs I’ve seen online, the company has a 130% payout ratio based on earnings, and about 80% based on operating cash flow. It very frequently has negative free cash flow. None of this means that it is “impossible” for the company to keep paying its dividend, but said dividends might be supported by debt issuance and other unsustainable means. I wouldn’t be surprised to see this company continue slowing down its dividend hikes, which have lately been much smaller (about 3%) than they were in the past (10%+).
Foolish takeaway
Despite the one risk mentioned above, Enbridge is a pretty remarkably strong company. Its stock isn’t dirt cheap, but it could add considerable income to your portfolio.
