Passive-income investors who are looking to stretch their portfolio yield a little bit higher without having to put themselves at great risk might wish to consider some of the dividend heavyweights while their shares are in a tough spot. Indeed, buying a dividend-growth star on a pullback can be a wise move for long-term investors who are willing to buy and hold, or better yet, buy and forget.
Either way, this piece will look at a dividend stock that might make sense to consider if you’re looking for relative value, insulation from the AI boom (one that many fear could end in a painful bust), a heightened dividend, or a predictable dividend growth trajectory from here.
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Enbridge: A dividend-growth giant that’s finally worth backing the truck on?
When it comes to true dividend growth champions, it’s hard to look past a name like Enbridge (TSX: ENB). In my view, it’s a non-negotiable must-buy whenever shares slump and fall into a correction. But, of course, investors should always stay in tune with the latest developments and the potential emergence of industry- or company-specific headwinds.
For the midstream energy giant, I think that shares are merely cooling off after one of the strongest bull runs in recent memory. Indeed, even a great business, one that’s enjoyed a substantial multiple re-rating, ought to encounter a few bumps in the road every so often. In my humble opinion, that’s only healthy.
For Enbridge, the shares got maybe a little bit ahead of their skis back in June and July. Of course, there were a number of concerns, ranging from analyst downgrades (more recently, shares have been on the receiving end of a notable upgrade) to the froth on the multiple, and the unfortunate, but certainly not devastating, postponement of the phase two expansion of the Mainline pipeline. If you were looking for reasons to sell, you didn’t have to look all too far to find them.
The bottom line
But now that the stock is down 13% in what was a sudden correction, questions linger as to whether the worst is over and whether the new multiple (26.9 times trailing price-to-earnings (P/E)) is the right price to pay for a premium cash cow that has one of the widest physical infrastructure moats in the country. In my view, the dividend-growth star is a fairly valued winner to pick up on weakness.
With Enbridge winning some love from some analysts last week, perhaps it’s time to revisit the name while the dividend yield is above 5.5%. Add the Westcoast joint venture into the equation, and I do think that Enbridge might have the means to give its growth a bit of a jolt without having to take on a more considerable sum of debt. Indeed, I’m a big fan of such joint ventures that allow Enbridge to efficiently seize opportunities without having to put its credit rating at risk.
Of course, Enbridge will need to share the spoils. Either way, it seems like a terrific middle ground in a climate where investors are increasingly put off by rising debt loads. In short, Enbridge is doing a fantastic job of juggling growth and its dividend growth commitment to shareholders.
