Over the last year, it seems as though stocks from almost every sector and industry have fallen in value. Even high-quality and reliable defensive stocks like Enbridge (TSX:ENB) have pulled back from their highs, creating excellent buying opportunities for investors.
Although we’ve been in this uncertain economic environment for over a year now, these environments don’t last forever. Furthermore, they don’t occur very often. So, it’s essential to take advantage and ensure you’re buying the highest quality stocks for your portfolio, ones that you can hold for years and gain exposure to at an ideal price.
In Enbridge’s case, because the stock is so resilient and has a lengthy track record of weathering economic downturns, you almost certainly won’t see it fall significantly in price.
Investors should also consider the stock’s long-term growth potential, significant passive income generated, and ability to protect your capital through a recession or bear market. All considered, with the stock trading below $50 a share, it looks like a no-brainer buy.
Enbridge’s operations give it a tonne of resiliency
Energy is essential in our economy. And while many energy companies can be highly volatile as they are exposed to energy prices, Enbridge is a much more stable and reliable investment due to the fact that it’s an infrastructure stock with much less exposure to commodity prices.
Furthermore, not only are Enbridge’s operations essential, but they are also significantly diversified, both geographically across North America but also by segment.
The company is responsible for transporting roughly 30% of the oil produced in North America, as well as 20% of the natural gas consumed in the United States.
In addition, Enbridge owns the third-largest gas utility company in North America, another low-risk and essential business that helps to diversify its operations.
Plus, on top of its transportation operations and utility business, Enbridge is also investing in the future, particularly by advancing new low-carbon energy technologies such as hydrogen, renewable natural gas, and carbon capture utilization.
In fact, Enbridge was an early investor in renewable energy and has one of the fastest-growing green energy segments in North America.
Therefore, given its well-diversified operations and essential nature of each of these segments, it’s no surprise why the stock is so reliable and Enbridge has a track record of weathering past economic downturns.
Enbridge is an ideal core portfolio stock
The fact that Enbridge is such a massive company and has such a dominant position in an essential industry that has significant barriers to entry makes it an ideal stock to buy for your portfolio and hold for years.
The company is highly reliable. But more importantly, because it’s a low-volatility stock and has such resilient operations, it can help improve the stability of your portfolio.
Plus, in addition to the stability it offers, another significant reason why it’s such an ideal core portfolio stock is that it’s consistently increasing the dividend payments it makes to investors. Furthermore, the dividend is constantly being increased despite the fact that Enbridge spends billions of dollars each year on capex to expand its operations.
In fact, Enbridge’s dividend growth streak is now over a quarter-century-long. That’s a long time over several economic downturns in which it has consistently generated enough cash flow not just to make its dividend payments but also increase those payments annually.
In the last five years alone, Enbridge stock has increased its dividend by more than 32%. Today, the stock is offering a yield of approximately 7.2%. Furthermore, with the stock now trading below $50 a share, its forward price-to-earnings ratio is just 16.6 times. That’s below both its 5-year and 10-year averages of 18 times and 20.8 times, respectively.
Therefore, while this impressive and reliable dividend stock trades undervalued and offers a higher yield than normal, it’s easily one of the best stocks you can buy today.
