ENB:CC - Does a 7.5% Yield With Relative Stability Sound Good? Consider This Energy Giant
2024-03-29 20:00:00 ET
Investing in top-tier dividend stocks is a proven way for long-term investors to grow their wealth. Of course, such dividend stocks create passive income streams, similar to bonds. And for investors in companies like Enbridge ( TSX:ENB ), these yields can be large. Currently, Enbridge stock yields a whopping 7.5% , making this a high dividend yielding company many investors are watching closely.
Here’s more on why Enbridge ought to be a dividend stock investors consider owning for 2024 and beyond.
Energy independence requires a healthy Enbridge
As a leading North American pipeline operator, Enbridge’s business model is one that’s inexorably linked to domestic energy independence. Given ongoing geopolitical issues, maintaining a steady flow of crude oil and natural gas within the continent will likely remain a key focal point of governments, both north and south of the border.
Enbridge’s network is extensive, with assets spanning the Canadian Mainline system, regional oil sands, and natural gas pipelines. Furthermore, Enbridge is Canada’s largest natural gas distribution company and operates a regulated natural gas utility. The company also has small renewables portfolios, focusing on onshore and offshore wind projects.
For those thinking about the future of energy in North America, Enbridge’s key infrastructure is a big piece of the puzzle. The cash flow stability provided to investors helps to support its high dividend, and is one I think will remain consistent for years to come.
Financial performance remains strong
Enbridge’s 2023 financial results released in February paint a picture of a strong and stable energy infrastructure giant. The company brought in earnings of $5.8 billion (or $2.84 per share), much higher than the previous year’s total of $2.6 billion. This surge led to EBITDA of $16.5 billion, putting the company’s trailing price/EBITDA ratio at a little over six times.
That’s relatively cheap, for a company providing this kind of cash flow and earnings. Of course, debt-related concerns continue to hamper the stock, with some upcoming refinancing activity likely to negatively impact the company’s key metrics. However, assuming interest rates do come down, Enbridge remains an intriguing way to play this potential catalyst.
Why is Enbridge a buy?
Fossil fuels are certainly being phased out, and Enbridge’s core business model may indeed see some turbulence over time. Left-leaning government policies in recent years continue to hammer this fact of life home.
Of course, Enbridge has been doing well to invest in future forms of energy, and its core network will remain integral to energy independence for the next few decades. So, for investors who aren’t looking 50 years or more down the road, this stock certainly looks like a stable bet for now.
The company’s continued cash flow and earnings stability matter more than growth. Most investors may be okay with a stock price that stays stable, but a yield that remains in the 7.5% range. Personally, that’s what I expect from this energy infrastructure giant.
So, for those looking for a bond proxy with a market-beating yield, Enbridge stock will remain a great choice.
The post Does a 7.5% Yield With Relative Stability Sound Good? Consider This Energy Giant appeared first on The Motley Fool Canada .
Fool contributor Chris MacDonald has positions in Enbridge. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy .
2024