Why Enbridge (ENB) is a Great Dividend Stock for Retirees

Enbdrige

There are certain stocks that provide unique benefits for retirees. These stocks have some specific features that are hard to find in the market and can provide great cashflows for someone who is retired. One of the stocks that recently moved into the ‘buy’ category for many retirees is Enbridge (ENB). ENB offers great dividend yields with the possibility of recouping the original investment in a relatively short period of time. Many experts speculate that the energy sector is something that will continue to grow for the foreseeable future. As a result, many people are investing in stocks like Enbridge that offer high quarterly dividends. While the stock is currently trading around $34.00 it provides quarterly dividend yields of around “55 cents.” This yield is surprisingly high for a company that has reliably produced solid revenue streams. If you are a retiree who is interested in an energy stock with much potential for growth, then it is in your best interest to research great stocks like ENB.

Enbridge makes its revenues in a variety of ways. It is one of the largest transporters of energy in North America and has a foothold in the natural gas and petroleum markets. The company is also scheduled for major upgrades to its piping with the “Line 3 Replacement Project.” This is a pipe that runs through the United States and Canada and transports tar sands crude oil. The project intends to provide more safety to the pipe as well as improve the efficiency through which materials are moved. The project also seeks to improve revenue streams for Enbridge, which makes the bulk of its profit from various forms of energy transportation. Though there has been controversy about the pipe, many believe that it will provide good job and economic opportunities for the grounds it covers. This is in addition to the benefits received by both countries. It has been a controversial project, but the hope is that it provides more value over the long term than any risks that may be incurred. Gauging these types of projects are difficult, but Enbridge is committed to working in a diligent and safe manner.

The past several years have all seen “revenue increases” for Enbridge. For example, their 2018 revenue was 35.78 billion dollars, which represented an increase of 4.52% over their 2017 revenue. The company has continued to grow and find profits in places that might not be expected. For example, there has been a major boon in the natural gas business which has allowed companies to extract more gas than previously thought. North America has seen natural gas production increase as a whole and will continue to enjoy the benefits of additional production. Another reason that the company has created such goodwill with its investors involves the high dividend yield that the company typically boasts. The average dividend for many sections of the economy is 2-3%. However the ‘basic materials’ sector, of which ENB is a part, boasts higher dividend “returns than most.” This is largely a result of companies that want to compensate investors for industries that have large amounts of risk.

The truth is that the oil and gas industry can be very difficult to navigate at times. The prices of these commodities fluctuate widely and can unnerve investors who don’t possess “sea legs”. One of the advantages for retirees is that there are many buy and hold options which will continue to produce a dividend even in lean times. Ultimately, this comes down to personal preference and how the portfolio is allocated. Different investment plans call for different strategies but holding onto stocks for the long term is oftentimes the best play. The natural gas and petroleum sector is particularly difficult to navigate, which is why it is important to understand all the aspects of the business and the research that goes into making a sound investment. It is not surprising that many retirees prefer stocks that generate a constant cashflow in hopes that the investment will outlive them.

It should also be worth noting that retirees should generally prefer stocks that have low price-to-earnings (P/E) ratios. A low P/E ratio often indicates good things about the stocks and provides some insights into how much the company is worth. Though this is not the only indicator worth considering, it does say something about the volatility of the stock and what kinds of returns can be expected over the life of the investment. While it is impossible to evaluate a stock from a single indicator, the P/E can tell you a lot about the business you are investing in. Common stock advice indicates that the lower P/E, the more reliable the earnings will be. When you are close to retirement age it is important to pick stocks that provide security, and not give into the newest craze that could bust without any forewarning. One of the advantages of EBN is that it has a very respectable P/E ratio of 16.25. This shows that the stock has matured and will be less volatile than comparable stocks going forward.

Overall, there are lots of reasons to be excited for Enbridge and the various projects that they have embarked on in the last decades. One of the advantages of the oil and natural gas industry is that there are many barriers to entry which will create a “moat” around industries that are already entrenched in the system. This moat acts as an invisible barrier which prevents other companies from encroaching on its territory. Given the heavy amount of regulations that are present in most areas of oil and natural gas, it will be very hard for any competitor to offer the same things as Enbridge. This is another reason that retirees will find ENB to be such a good buy. The truth is that volatility is something to be avoided when you reach the later years of your investing career. This is why attention to a portfolio is so important. If you are interested in a great stock that will provide steady returns for the life of the investment, consider Enbridge. It is a company that is loyal to shareholders and dedicated to generating consistent profit.


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