Shares of Enbridge (ENB 0.37%) have not been performing very well over the past year, with the stock down around 13%. There are some reasons for the decline, but none are likely to be lasting problems. Meanwhile, there's plenty of opportunity for growth ahead from the company while investors get to collect a generous and well-supported dividend.

What's gone wrong?

Enbridge is one of the largest midstream companies in North America. It owns a collection of energy-infrastructure assets that would be difficult to replace. The company, like most in the midstream sector, charges fees for the use of its assets. It's a fairly stable business given that demand for energy, and thus energy infrastructure, tends to be resilient even if oil prices are falling. All in all, Enbridge is kind of boring.

Four people in protective gear in an energy processing facility.

Image source: Getty Images.

But it isn't immune to problems. One notable issue today is that Enbridge is based in Canada. That means that it pays dividends in Canadian dollars, with the sum U.S. shareholders collect impacted by exchange rates. So, even though the stock is listed on a U.S. exchange, investors tend to push the shares lower when the Canadian dollar is weak to make up for the impact of exchange rates on the dividend. That's part of what is going on today, even though exchange rates tend to balance out over the long term

In addition to that, Enbridge is also facing some new competition from a pipeline that is set to connect oil from Canada to key U.S. energy hubs. It is lowering the rates it charges to lock in as much volume as possible before the new pipeline opens. Over the long term, there should be enough oil to have both pipelines operate profitably, but it is likely that there will be some short-term give-and-take between the two. This probably isn't worth getting too upset over. 

And then there's Enbridge's leverage, which has ticked higher over the past couple of years. Although still lower than it was not too long ago, investors are reasonably worried that more leverage will leave the company with less financial flexibility. Still, the company's balance sheet is investment-grade rated, and management has proven it can manage its leverage well over time. The company couldn't have increased its dividend for 28 consecutive years if it didn't manage its finances in a prudent manner.

ENB Financial Debt to EBITDA (TTM) Chart

ENB Financial Debt to EBITDA (TTM) data by YCharts

A pleasing dividend

So there are some reasons to be downbeat here, but none of the problems seem like a reason to avoid the stock, which brings up the reasons to consider buying it. 

The first is the high yield. At 7.2%, the dividend yield is well above that of the broader market's roughly 1.6% yield, using the S&P 500 Index as the reference point, and the average energy stock's 4.3% yield, using Energy Select Sector SPDR ETF as a proxy. If you are looking to maximize the income you generate from your portfolio, that should be very attractive. 

And, as noted, it is backed by 28 years of annual dividend increases. The company's distributable cash-flow payout ratio, meanwhile, is set to come in at around 65% in 2023, using the midpoint of management's full-year guidance. That's right in the middle of its target range, so it doesn't seem like there's any problems there. On top of that, the company has around $3 billion in what it calls discretionary investment capacity. In a worst case scenario, some of that capital could be used to support the dividend through a rough patch.

And then there's growth, which won't be exciting but isn't moribund, either. The company has roughly $15 billion worth of investments on the drawing board through 2028. That should be more than enough to keep cash flows growing and, in turn, the dividend expanding. Most of that spending, meanwhile, will be put toward natural gas and renewable power, two areas that should see strong demand as the world shifts toward cleaner energy sources. That said, the growth opportunity isn't as robust as it once was in the midstream space, so the high yield will probably be the bulk of your return here. 

A good risk/reward balance

Is Enbridge perfect? No, but no company is. The positives, meanwhile, appear to outweigh the negatives. So, if you are looking for a high-yield stock that is likely to keep paying you a hefty dividend for years to come, you should probably do a deep dive on Enbridge today. If you don't, you could miss the opportunity to add a reliable, high-yield dividend stock to your portfolio.