Oil Boom: This 6% Dividend Stock Could Go Higher

Dividend stocks like Enridge (TSX:ENB)(NYSE:ENB) could boost payouts this year.

| More on:

The global energy crisis shows no sign of abating. Inventory is as tight as ever, and global demand is stronger than ever. That’s pushed crude oil to multi-year highs and made producers much more profitable. However, one dividend stock in the sector stands out as the least-risky bet. Here’s a closer look at Enbridge (TSX:ENB)(NYSE:ENB).

Cash flow pipeline

Calgary-based Enbridge isn’t an oil or gas producer. Instead, it owns and manages one of the largest networks of oil pipelines in North America. The company transports fuel and earns revenue based on volume. In my view, that’s a more stable business model. 

The price of oil is unpredictable. A sudden plunge in demand (like the lockdown in China) or a sudden surge in supply (from OPEC perhaps) could change the outlook quickly. Oil and gas producers are highly sensitive to these shifts. However, the flow of energy across North America is much more predictable and stable. That’s why Enbridge is a safer bet for conservative investors. 

This stability has allowed the company to deliver dividends consistently over 67 years — despite several boom-bust cycles along the way. 

Dividend growth

Enbridge’s dividend yield is already better than most oil producers. While large-cap oil stocks like Suncor offer a 3.8% dividend yield, Enbridge offers 5.88%. Unlike oil producers, Enbridge has never cut dividends. Instead, it has expanded them every year for 27 consecutive years. 

Earlier this year, the management team forecasted dividend growth of 5-7% for the years ahead. I believe dividends could grow faster than that. Alberta premier Jason Kenney told a U.S. Senate committee on Tuesday that Canadian oil producers could boost exports to the U.S. by up to one million barrels a day. If this boost materializes, Enbridge could be a prime beneficiary. The premier is pushing for the approval of a new pipeline to carry the excess production. 

Meanwhile, Enbridge has been deploying cash into expansion. Last year, the company purchased the Ingleside Energy Centre port near Corpus Christi for US$3 billion in cash. That’s the largest oil export terminal in North America. 

The company is also actively pursuing delivery agreements with new natural gas facilities that are still under construction. This includes delivery for the upcoming Plaquemines LNG facility in Louisiana, Texas LNG Brownsville LLC project, and NextDecade Inc.’s proposed Rio Grande facility.

Put simply, Enbridge is moving aggressively to expand capacity. That means revenue and profits could surge higher than expected in the years ahead. Investors could anticipate more dividend growth. 

Bottom line

The global energy crisis is persistent. Oil and gas producers are raising dividends now but are still highly sensitive to geopolitical and economic factors. Pipeline giant Enbridge could be a more reliable bet for investors seeking consistent passive income over the long term. Keep an eye on this opportunity as it delivers more dividend growth in the years ahead.  

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Energy Stocks

man touches brain to show a good idea
Energy Stocks

1 No-Brainer Energy Stock to Buy With $500 Right Now

Should you buy a cyclical energy stock at its decade-high? Probably not. But read this before you make a decision.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Top Canadian Renewable Energy Stocks to Buy Now

Here are two top renewable energy stocks long-term investors can put in their portfolios and forget about for a decade…

Read more »

oil and gas pipeline
Energy Stocks

Where Will Enbridge Stock Be in 3 Years?

After 29 straight years of increasing its dividend and a current yield of 6%, here's why Enbridge is one of…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

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

Enbridge stock just hit a multi-year high.

Read more »

oil pump jack under night sky
Energy Stocks

Where Will CNQ Stock Be in 3 Years?

Here’s why CNQ stock could continue to outperform the broader market by a huge margin over the next three years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »