Enbridge (ENB +0.35%) is likely to be attractive to dividend lovers given its lofty 5.7% yield. For reference, the S&P 500 index is yielding just 1.1% while the average energy stock yields around 3.1%. But a high yield alone shouldn't be the main deciding factor for any investment. Which is why you'll want to know these three facts about Enbridge.
1. Enbridge's operations are diversified
From a big-picture perspective, Enbridge is a pipeline company. That means it operates the energy infrastructure that helps to move oil and natural gas around the world. This is a fee-driven business, with Enbridge charging customers based on the volume of energy it moves. The price of energy isn't particularly important to its financial results.
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In addition to that core business, Enbridge also operates several regulated natural gas utilities. This business provides a reliable income stream, with government oversight generally leading to slow and steady growth throughout the economic cycle. And last up is the company's clean energy business, which is relatively small, but gives it a toehold in an emerging industry. The cash flows here are backed by long-term power supply contracts.
2. Enbridge is a reliable dividend payer
The reliable cash flows generated by Enbridge's various businesses help support its very attractive 5.7% dividend yield. However, a big yield alone isn't really proof of anything. The real reason to find that yield so attractive is that Enbridge has increased the dividend backing the yield for 30 consecutive years.
That's an impressive streak by any standard, but it underscores the business's consistency. If you use your dividends to supplement your Social Security payments in retirement, Enbridge has proven that it is worth trusting with your hard-earned savings.
3. Enbridge has a long-term plan
Oil pipelines, natural gas pipelines, regulated natural gas utilities, and renewable power assets may seem like an odd amalgam of investments to put into one business. In some ways, it is, but in the long term, it makes perfect sense.
NYSE: ENB
Key Data Points
Enbridge's big goal is to evolve alongside the world's evolving energy needs. Right now, carbon fuels are still king, but things are slowly shifting toward cleaner alternatives. That's why the company's portfolio looks like it does. Your takeaway, however, is that you can buy it and hold for the long term, confident that management will change as needed so it can keep paying you your dividends.
Enbridge is a cornerstone investment
High-yield Enbridge isn't exciting, but it's not meant to be. It is built from the ground up to be a reliable dividend stock, as the three points above highlight. And that's why you should consider it as a foundational investment for your income portfolio today.
