Why Enbridge Stock Could Be the Dividend Stock to Buy This Fall

Here’s why long-term income investors may want to consider Enbridge (TSX:ENB)(NYSE:ENB) stock right now.

| More on:

Identifying a core long-term dividend stock is not easy, especially in this current economic environment. That said, only a few companies provide as high (and defensive) a yield as Enbridge (TSX:ENB)(NYSE:ENB) right now. And in my view, the next few months could be positive for shareholders of Enbridge stock.

Indeed, for investors who are concerned regarding inflation or are simply looking to add income to their portfolio, Enbridge stock is an option worth considering. Here’s why.

New Line 3 project will be operational in Q4

As a top TSX dividend stock, Enbridge provides a level of cash flow stability other companies simply can’t. This cash flow stability comes from a business model that is utility-like in nature.

Oil and gas producers require a steady flow from production sites to refineries. Enbridge provides this in exchange for various capacity contracts, locking in cash flows over a given period of time.

By doing this, the company can gauge the exact ROI and IRR of its massively expensive projects. One such project is the upcoming Line 3 replacement.

As per Enbridge’s recent press releases, the company expects to being transporting crude oil from the Canadian oil sands to the U.S. by Q4. This will bring a total capacity of 620,000 barrels per day online, significantly higher than the older Line 3.

For Canadian oil sands producers, this project provides much-needed relief for a backlog that has built in recent years. For Enbridge, this pipeline provides even higher cash flows over time, which will be used (in part) to pay higher dividends.

The entire sector, as well as investors in Enbridge stock, benefits from this new pipeline. While some legal and environmental concerns remain, it appears this expansion project will be finished shortly.

Export capacity will increase following new acquisitions

Enbridge will be acquiring one of its rivals, Moda Midstream, in a $3 billion in an all-cash deal. The main objective of this takeover is to increase its export capacity further. Following this deal, Enbridge’s focus will switch towards the U.S. market, as it completes the Line 3 expansion project.

Enbridge will also purchase a 20% stake in the Cactus II Pipeline, as the company aims to increase its cash flow growth potential. Undoubtedly, these acquisitions certainly appear to be a cost-effective way for Enbridge to achieve this objective.

Enbridge recently commented that these acquisitions would be completed using current liquidity. Accordingly, those concerned about a ballooning balance sheet appear to have nothing to worry about. The accretive nature of these deals should bode well for shareholders in Enbridge stock over the near  to medium term.

Bottom line on Enbridge stock

A juicy yield of 6.5% with Enbridge stock is certainly enticing. However, I think Enbridge has the business model and cash flow potential to not only live up to this yield but provide hikes down the road.

Long-term investors seeking high-yield equities can’t go wrong with Enbridge stock. Indeed, this remains one of my top picks for those seeking bond-like yields above 5% today.

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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »