Whether Investors Want to Buy, Sell, or Hold This Energy Stock, It All Makes Sense

Published on: May 11, 2024
Author: Caroline Kong

Canadian investors are no strangers to energy infrastructure giant Enbridge (TSX:ENB) stock. As a pipeline company, the volatility of oil prices will not have direct impact on Enbridge’s earnings, as the company’s income are largely tied to long-term contracts.

Aside from Enbridge’s current dividend yield of more than 7%, which is very attractive. Beyond that, there are good reasons for investors to consider buying, holding or selling this energy stock, but for different reasons.

Reasons to Buy Enbridge

It’s no exaggeration to say that Enbridge is a stock worth adding to any portfolio. The company operates the world’s largest and most complex network of pipelines, transports one-third of all crude oil produced in North America and nearly one-fifth of U.S. market demand for natural gas. In other words, it has a highly defensive cash cow business. But that’s not the only area of Enbridge’s business.

The company also has a growing renewable energy portfolio, with more than C$9 billion invested in more than 40 facilities in North America and Europe. Enbridge also operates the largest natural gas utility in North America, which also gives the company a reliable source of revenue and defensiveness. At the current share price, Enbridge has a dividend yield of 7.12%, one of the highest dividend yields in TSX, and has been paying dividends to shareholders every year for the past three decades.

Reasons to Sell

Despite the guaranteed income and attractive dividend, this energy stock may not be an ideal stock for existing Enbridge shareholders. In fact, Enbridge stock has risen just 4% over the past five years, and shares have fallen nearly 9% in the last two years. For growth-seeking investors, it also seems sensible to forgo a generous dividend yield and then trade it for better growth in the short term.

Reasons to Hold

For those who are currently holding Enbridge stock, it makes sense, especially for long-term investors, to continue to hold the stock considering solid fundamentals and a generous dividend yield. Besides, Enbridge has a long history of upward momentum and the ability to continue that momentum, so this decision could pay off handsomely in the long run.

What Should Investors Do with Enbridge Stock?

Any investment carries risk, and while the company’s core business is highly defensive, its share price has seen limited growth over the years. Potential investors would be wise to consider Enbridge stock as a long-term investment, as the company has paid a generous annual dividend in recent decades.

Overall, Enbridge stock is a good long-term investment that can be used as a core holding in any diversified portfolio.

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