Enbridge: A Safe High-Yield Stock for Steady Retirement Income

Enbridge is a relatively safe high-yield stock for retirement income, as a part of a diversified portfolio, especially at a bigger margin of safety.

Kay Ng

Author Bio

Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt.

Education

Bachelor of Science (BSc) in Computer Science, University of British Columbia
Further studies in financial markets, finance, and financial accounting

Areas of Expertise

Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies.

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Favorite Investment Quotes

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published October 29, 8:45 pm EDT

For Canadian retirees seeking reliable income, Enbridge (TSX: ENB) is a blue-chip dividend stock worth considering. With a long history of dividend growth, a resilient energy infrastructure business, and a yield of 5.7% at $67.89 per share at the time of writing, it offers an attractive combination of income and stability. However, while Enbridge has demonstrated impressive resilience, investors should weigh its risks and valuation before buying.

Hourglass and stock price chart — Source: Getty Images

A proven dividend record built on resilience

Enbridge has navigated numerous energy market downturns over its more than 70-year history of paying dividends, including the 1980s oil glut, the 2008 financial crisis, the 2014–2016 oil price collapse, and the COVID-19 economic shutdowns. Throughout these disruptions, the company maintained its dividend, building a track record trusted by income-focused investors.

A key reason for its resilience is its midstream energy infrastructure business. Enbridge generates revenue by transporting and handling energy through pipelines and related infrastructure. This tollbooth-like model helps reduce its direct exposure to fluctuating commodity prices, supporting more predictable cash flows.

Enbridge has delivered 31 consecutive years of dividend increases. Although its dividend growth has slowed from its historical 20-year annual growth rate of approximately 10%, the company has continued to increase its dividend around 3% annually in recent years.

For retirees, that combination of a meaningful starting yield and modest dividend growth can help supplement retirement income while partially offsetting inflation.

Cash flow and growth support future income

Enbridge’s recent financial performance provides further evidence of its resilience. In the first half of the year, adjusted EBITDA, a cash flow proxy, increased 1.1% to $10.6 billion, while distributable cash flow (DCF) rose 1.8% to $6.8 billion. Its dividend payout ratio was approximately 65%, comfortably within management’s target range of 60% to 70%.

This matters because dividends are most dependable when supported by recurring cash flow rather than excessive borrowing. Enbridge’s payout ratio leaves some room to manage business needs and support shareholder distributions.

Looking ahead, management targets medium-term DCF-per-share growth of approximately 5% annually. If achieved, this could support dividend increases of around 3% per year.

Planned investment is another potential growth driver: Enbridge aims to sanction up to $20 billion in opportunities through 2027 and approximately $50 billion through 2030. Successful execution could strengthen its earnings base and sustain future dividend growth.

Nevertheless, investors should monitor changing energy demand, regulatory developments, project costs, interest rates, and Enbridge’s substantial debt levels. Higher borrowing costs or weaker-than-expected growth could pressure cash flow, valuation, and the share price.

Is Enbridge stock a buy at today’s price?

At $67.89, Enbridge offers a 5.7% dividend yield and trades approximately 13% below the analyst consensus price target cited at the time of writing. This discount suggests a bit of margin of safety for the risks listed in the previous paragraph.

But for a mature, income-oriented stock, a wider margin of safety may be preferable. Requiring at least a 20% discount to that consensus target implies a potential entry price of $62.60 or lower, at least 7.8% below the quoted share price. Conservative investors could consider waiting for such an opportunity rather than chasing the yield.

Foolish investor takeaway

Enbridge’s long dividend-growth record, relatively predictable infrastructure cash flows, and attractive yield make it a compelling candidate for retirement-income portfolios.

Its dividend appears supported by current cash flow, while planned investments offer opportunities for continued growth. However, debt, interest rates, and execution risks remain important considerations.

Retirees should avoid relying on a single stock and instead combine dividend-paying equities with bonds, cash, and other diversified investments to build a more resilient income strategy.