Every so often, a dividend stock that is a cash cow emerges – a stock that offers such a compelling investment case that it becomes too hard to ignore.
For prospective investors, that cash cow right now is Enbridge (TSX: ENB), and here’s why the energy infrastructure behemoth belongs firmly in your portfolio.
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Did you know that Enbridge is the complete package?
Enbridge is known for its pipeline business. The pipeline operation does generate the bulk of Enbridge’s revenue, but it’s not the only business to boast about.
The pipeline operation consists of both crude and natural gas elements, hauling massive amounts of both each day. So much so that the segment is often compared to a continental toll road, collecting passive fees.
To put that sheer volume (and defensive appeal) into context, Enbridge hauls a whopping one-third of all North American-produced crude. Turning to natural gas, the company transports one-fifth of the natural gas needs of the entire U.S. market.
And that’s not even the best part.
Enbridge charges for use of its network (again, think toll road), but that charge is not based on the price of the commodity being hauled. This means that irrespective of which way oil prices move, Enbridge still generates a recurring and stable revenue stream.
That revenue stream allows Enbridge to pay out a handsome dividend and earn that cash cow name (more on that in a moment) and invest in growth initiatives.
Enbridge’s multi-billion-dollar project backlog comprises some of those growth initiatives. It’s also worth mentioning the other business units that Enbridge operates, which further enhance the appeal of this cash cow.
Those other parts include a growing renewable energy business and operating one of the largest natural gas utilities in North America. Both are stable revenue generators backed by long-term regulated contracts.
More importantly, they continue to grow.
What about that dividend?
One of the main reasons why investors love Enbridge and why it is the cash cow of the market is its superb dividend.
Enbridge offers investors a tasty quarterly dividend, which it has been paying out for an incredible 70 years. Impressively, the company has also amassed an incredible 30 consecutive years of annual bumps to that dividend. This makes it one of the best dividend stocks on the market.
As of the time of writing, Enbridge’s dividend works out to a very tasty 5.6% yield.
This means that a $30,000 investment (as part of a larger, well-diversified portfolio) will earn over $1,600 in the first year. Note that investors who aren’t ready to draw on that income yet can choose to reinvest it, allowing it to grow until needed.
Buy this cash cow now
Enbridge really is the complete package. The company boasts multiple, diversified, defensive business segments that generate cash. Enbridge also offers one of the best dividends on the market, with three decades of annual increases.
In my opinion, Enbridge should be a core holding in any well-diversified portfolio.
Buy it, hold it, and watch your future income grow.
