Here’s a Little Stock That Can Beat Enbridge Inc. (TSX:ENB)

If you want superior returns, Enbridge Inc. (TSX:ENB)(NYSE:ENB) is probably not the best idea. Here’s a higher-growth company that you can consider instead.

| More on:

If you have invested in the energy space for dividend income, you’ll most definitely know about the leading North American energy infrastructure company, Enbridge Inc. (TSX:ENB)(NYSE:ENB).

Enbridge has increased its dividend for 22 consecutive years. And there’s no sign that indicates that it’ll halt that dividend growth streak. However, here’s a little stock that can outperform Enbridge.

Tidewater Midstream & Infrastructure Ltd. (TSX:TWM) is a small energy infrastructure company that you may not have heard of. If so, it’s normal because there’s less analyst coverage on the stock.

Tidewater pays a sustainable dividend

Tidewater just started paying a dividend this year. Although it only offers about half the dividend yield that Enbridge offers, its dividend yield is still a decent 3.08% yield. At the recent quotation of $1.30 per share at the time of writing, Tidewater is trading at the low end of its trading range since 2015. So, it’s not a bad place to enter the stock.

Tidewater’s dividend is sustained by a payout ratio of about 67%.

Tidewater has strong price appreciation potential

Actually, Tidewater’s dividend is more like a bonus on top of its growth potential. Here’s how exciting the opportunity in Tidewater is. While the analyst consensus at Thomson Reuters Corp. has a 12-month target of $52.20 per share for Enbridge (or near-term upside potential of about 13%), the consensus has a target of $2.18 per share for Tidewater (or near-term upside potential of about 68%!).

The business

Tidewater is building a diversified natural gas and natural gas liquids midstream and infrastructure company. It aims to profitably grow, and it has been doing so by acquiring and developing oil and gas infrastructure, including gas plants, pipelines, railcars, trucks, export terminals and storage facilities. It plans to provide customers with a full service, vertically integrated value chain through its acquisition and developments of oil and gas infrastructure.

Since Tidewater became a publicly traded company in 2015, it has announced or completed more than 14 acquisitions in strategic locations at steep discounts. As a result, it has experienced nine consecutive quarters of cash flow growth.

In fact, management expects the company to be able to grow its EBITDA per share by 20% per year for the next two years or so. Currently, Tidewater’s pipeline network has connectivity from the Montney, to the Deep Basin, and into Edmonton in Alberta.

Investor takeaway

Tidewater is both a value and growth play. On a forward basis, it’s trading at about a 50% discount compared to its peers, which likely has partly to do with its smaller size. However, if management is able to achieve its growth target set, the stock should trade significantly higher. While waiting for the stock to appreciation, investors can get a +3% dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Tidewater and Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »