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ENB Stock: Why Is Enbridge Stock Up 21% In 2021 from its November’s Low?

Enbridge Stock

Headquartered in Alberta, Canada, Enbridge (TSX:ENB) is the largest energy transportation company in North America with a massive presence in Canada and the United States. The share prices of Enbridge stock on TSX were up nearly 21% from last November’s low. The stock price was up at $46.30 on 24 March from $38.09 on 18 November.

Shares of energy stocks have been volatile in the past few months as the demand for oil plummeted due of the pandemic. While the demand for oil may increase in the days to come, it may not match the pre-pandemic levels, according to industry experts.

In this current scenario, it may not be the right time to take pure plays on the energy sector. However, investors can look at Enbridge to gain indirect exposure to this sector.

Impact of long-term pipeline contracts on Enbridge stock

Enbridge’s business model is based on long-term pipeline expansion projects. Currently, some of the company’s expansion projects have met with opposition. However, Enbridge has the potential to generate income in the long term. It is to be noted that the Canadian government supports the projects as they believe that stopping these projects can lead to fuel shortage and an increase in unemployment.

High dividend from ENB stock

Enbridge stock is a great option for investors looking for dividend income. Cash provided by the company’s operating activities has been to able offer attractive and consistent dividends. As per the company’s earnings report, the cash provided by operating activities was $9.8 billion in 2020 when compared to $9.4 billion in 2019, showcasing ENB’s ability to derive stable cash flows in a turbulent macro environment.

The Distributable Cash Flow (DCF) was $9.4 billion up from $9.2 billion in 2019. The company aims to maintain a dividend payout of 60-70% of its distributable cash flow.

The company further increased the 2021 quarterly dividend by 3% to $0.835 per share. This is the 26th consecutive annual increase in dividends.

Related article: 7 Benefits of Dividend Investing

Enbridge is also making the transition to renewable power sources. Its allocation to renewable power as a part of the total asset mix is slowly increasing. The company is developing low-cost options that assist in long-term growth

The Bullish takeaway

With the growth in the urban middle class, energy consumption is likely to increase in the future. The world will look for an affordable, clean energy supply. Enbridge is well placed to take cater to these requirements and keep investors happy with an attractive dividend yield.

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