Here's Why Enbridge Is a No-Brainer Dividend Stock
Most dividend-focused investors tend to concentrate on a stock's dividend yield. However, the more important factor to consider is whether the company can grow its payout. According to data from Ned Davis Research and Hartford Funds, companies that maintained their dividend have delivered 7.1% average annual total returns since 1973. On the other hand, dividend growth stocks have delivered a 10.7% total annual return.
One of the great things about Enbridge (NYSE: ENB) is it delivers the best of both worlds. The Canadian energy infrastructure giant offers a high dividend yield (6% compared to 1.7% for the S&P 500). It has also consistently increased its payout, delivering 27 years of consecutive dividend growth. With more growth ahead, it's a no-brainer dividend stock to buy.
Enbridge has one of the lowest-risk business models in the energy sector. It focuses on operating pipelines and utilities backed by long-term contracts and government-regulated rate structures. Overall, 98% of its cash flow comes from stable contract and rate structures, with 80% having some inflation protections in place. Meanwhile, 95% of its customer have investment-grade credit (implying they can continue paying Enbridge even if market conditions deteriorate). These factors enable Enbridge to generate very stable cash flow.
Source Fool.com
