I bought Enbridge (ENB 1.06%) in 2021 and have added to my position a couple of times since then. As a dividend investor, the most obvious draw is the North American midstream giant’s lofty yield of 5.1%, well above the broader market’s 1.1%. However, there is so much more to like about this energy business, which I expect to provide me with a reliable passive income stream for the rest of my life.
Enbridge is a cash flow machine
Enbridge is an energy stock, but it is really better viewed as a service provider. It owns the energy infrastructure that helps to move oil and natural gas around the world. It charges its customers fees for using its assets. That allows the company to sidestep commodity risk, with energy demand far more important to Enbridge’s results than oil prices. Given the importance of energy to the modern world, the volume flowing through Enbridge’s system tends to be strong throughout the entire energy cycle.
Image source: Getty Images.
That said, Enbridge’s big-picture focus is actually to provide the world with the energy it needs. Right now, oil and natural gas are very important. And they are likely to remain so for years to come. However, the world is shifting toward cleaner solutions.
This is why Enbridge also owns regulated natural gas utilities and clean energy assets. Both provide reliable cash flows, so there’s no change in the company’s fundamental approach. And management is, basically, shifting the portfolio in line with changes in global energy demand. That suggests I can comfortably own Enbridge for decades without worrying that it will get left behind as the world continues to go green.
Enbridge is conservative by nature
Some investors will look at Enbridge’s balance sheet and note that it is more highly leveraged than some of its midstream peers. That is entirely reasonable because of the regulated utility assets it owns. The fact is that Enbridge doesn’t take on undue risks. For example, it has an investment-grade rated balance sheet, and it targets a reasonable 60% to 70% of distributable cash flow payout ratio.
Today’s Change
(-1.06%) $-0.59
Current Price
$54.83
Key Data Points
Market Cap
$120B
Day’s Range
$54.83 – $55.49
52wk Range
$43.59 – $55.49
Volume
3M
Avg Vol
5M
Gross Margin
32.74%
Dividend Yield
4.99%
All in, Enbridge’s business model is built around paying a reliable and slowly growing dividend. At this point, the dividend has been increased, in Canadian dollars, for 31 consecutive years. I expect that streak to continue long into the future.
Slow and steady is just fine by me
If there’s one problem that crops up for investors, it is likely to be that Enbridge is a bit of a tortoise when it comes to growth. But slow and steady, with a lofty dividend yield, is right up my alley. If you are a dividend investor like me, Enbridge will probably be a good fit for you, too.
