ENB:CC - Is Enbridge the Best Dividend Stock for you?

2024-03-18 16:20:00 ET

Is your portfolio diversified? One of the best dividend stocks that is often mentioned is Enbridge ( TSX:ENB ). There are plenty of reasons for that view, which I’ll get into below while trying to answer a key question.

Is Enbridge the best dividend stock for your portfolio right now?

Meet Enbridge and all its parts

Most investors are familiar with one or two parts of Enbridge. The energy infrastructure behemoth is best known for its pipeline network, but that’s not all it does.

The notoriety associated with that pipeline network is for a good reason. Enbridge’s pipeline network, which contains both crude and natural gas segments, is huge. More specifically, it’s the largest and most complex pipeline system on the planet.

That translates into a massive amount of crude and natural gas and, by extension, revenue generated by Enbridge. And because Enbridge doesn’t charge use of its network by commodity prices, that revenue is somewhat immune to price volatility.

In case you’re wondering about the actual volume involved, Enbridge hauls nearly one-third of all North American-produced crude. The company is also charged with transporting 20% of the natural gas used by the entire U.S. market.

Let that massive volume, and by extension, the defensive appeal of that Enbridge sink in for a moment.

That’s not even the best part. Enbridge also operates both a promising utility business as well as a growing renewable energy portfolio.

Thanks to a series of well-executed acquisitions late last year, Enbridge’s utility business is the largest natural gas utility in North America. Earlier this month, that portfolio grew further thanks to the addition of Dominion Energy Ohio. The segment now comprises a whopping five million customers across Canada and the U.S.

Like Enbridge’s pipeline network, the utility business provides defensive appeal and a reliable revenue stream for investors to consider. That revenue stream also helps Enbridge continue to pay out a juicy dividend (more on that in a moment), which makes it one of the best dividend stocks on the market.

What about renewables?

Another lesser-known but still lucrative segment to note is Enbridge’s renewable energy business. Enbridge invested heavily into the segment for over two decades to establish yet another revenue stream with defensive appeal.

The over $9 billion invested into the segment to date has established Enbridge as one of the leading renewable energy companies. Enbridge’s renewable portfolio comprises over 40 facilities located across North America and Europe.

Those facilities, which include solar, wind and geothermal elements, have a net generating capacity of 2371 megawatts. That’s enough to meet the energy demands of over 1.1 million homes.

Prospective investors should also note that renewable energy facilities are similar in revenue generation to their fossil fuel-burning peers. In other words, they are bound by long-term, regulated contracts that provide a stable and recurring revenue stream.

In other words, they provide yet another defensive revenue stream that helps make Enbridge one of the best dividend stocks on the market.

Speaking of dividends…

One of the main reasons why investors continue to flock to Enbridge is for the dividend that it offers. As of the time of writing, Enbridge offers a quarterly dividend that boasts an insane yield of 7.62%.

This means that investors who allocate $35,000 towards Enbridge (as part of a larger, well-diversified portfolio ) can expect an income of over $2,650. While that’s not enough to retire on, it can provide a path to growth through reinvestments until needed.

Speaking of growth, another interesting point to note is that Enbridge has provided annual upticks to that dividend for nearly three decades without fail. Even better, the stock trades at a discount right now of 15% over the trailing two-year period.

That fact alone makes this one of the best dividend stocks to consider now.

Enbridge is one of the best dividend stocks to buy

No stock, even a defensive titan like Enbridge is without some risk. That’s why the importance of diversifying your portfolio cannot be understated. Fortunately, Enbridge offers investors plenty of defensive appeal to offset some of that risk.

In my opinion, Enbridge is one of the best dividend stocks on the market and should be a core holding as part of any well-diversified portfolio.

The post Is Enbridge the Best Dividend Stock for you? appeared first on The Motley Fool Canada .

Fool contributor Demetris Afxentiou has positions in Enbridge. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy .

2024