If you're a dividend investor, the first thing you'll probably notice about Enbridge (ENB +0.89%) is its attractive 5.6% dividend yield. For comparison, that's more than five times larger than the yield of the S&P 500 index (^GSPC 1.11%), and well above the 3.1% yield of the average energy stock. There's a lot more to like about this Canadian energy giant.
Enbridge is built to be boring
Enbridge's core business is moving oil and natural gas around the world via its large portfolio of North American midstream assets. It charges fees for the use of these assets, so the volume of energy flowing through its system is more important than the price of the commodities it's moving. Energy is vital to the modern world, so volume tends to be robust even when oil prices are weak.
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In addition to this business, Enbridge operates regulated natural gas utilities. These businesses must have their rates and capital investment plans approved by the government, yet they have monopolies in the markets they serve. The end result of this arrangement is generally slow and steady growth, along with reliable cash flows.
The last segment of Enbridge's business is renewable energy. Although it accounts for just a few percent of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA), it's contract-based and generates reliable cash flows. The more important piece of the story is that it gives the company a foothold in a market that is likely to see increased demand as the world shifts toward cleaner energy options.
NYSE: ENB
Key Data Points
Built for today and tomorrow
Enbridge's 30 consecutive annual dividend increases, in Canadian dollars, are proof that its business is a reliable income generator. However, the real reason why dividend investors may want to buy the stock today and hold for the long term is highlighted by the diversification of its business.
Enbridge's portfolio is filled with reliable cash-generating assets. But the portfolio mix also shows how the company is evolving to meet the world's changing energy needs. Oil is giving way to natural gas, which seems likely to give way to renewable power over time. If you're looking for an energy stock that could set you up for a lifetime of reliable dividends, Enbridge could be just what you're looking for, even as the world's energy needs shift in a cleaner direction.
