Shares of Enbridge (NYSE: ENB) have gained 16% over the past three months, as investor sentiment shifts regarding the future of this North American midstream powerhouse. However, that rise hasn’t fully closed the gap with rival Enterprise Products Partners (NYSE: EPD), which has seen its stock recover entirely from a peak in mid-2022.
Enbridge’s resurgence indicates that there may be further potential for growth. While Enterprise Products Partners has experienced only a 3.4% increase in the same period, Enbridge’s stock far outpaces this performance. At a glance, one might lean towards Enterprise as the more appealing choice based on recent trends.
Yet, looking over a longer timeline, especially the past three years, the dynamics change significantly. Both Enbridge and Enterprise peaked in mid-2022, but Enbridge experienced a deeper and prolonged decline. This higher volatility means that Enbridge’s recovery has the potential to be more pronounced, now showing that the company has further ground to cover to reclaim its earlier highs.
Currently, Enbridge is positioned as a more attractive option for investors looking for growth paired with income. The Canadian company’s dividend yield is approximately 6.6%, while Enterprise offers a slightly higher yield of 7%. However, for those aiming for stock appreciation alongside dividends, Enbridge might be the smarter pick right now.
What’s intriguing about Enbridge’s strategy is its evolution in response to changing energy demands. Unlike Enterprise Products, which closely hones in on midstream operations, Enbridge aims to diversify its portfolio. It has interests in natural gas utilities and renewable energy projects, including significant offshore wind developments. A pivotal move for Enbridge is its acquisition of three large regulated U.S. natural gas utilities from Dominion Energy, which is currently being integrated into its operations.
Investors have previously expressed concern about how Enbridge would finance its acquisition. The resulting leverage has led to heightened scrutiny, especially during a period of rising interest rates, which curbed the overall appeal of Enbridge’s stock. Yet, the situation is shifting. Enbridge has demonstrated robust management of the costs involved in the utility acquisition while successfully navigating the financial landscape, particularly as interest rates appear more favorable.
Looking ahead, Enbridge is on solid footing. With a track record of nearly three decades of consistently increasing dividends, it stands out as a reliable option for income-seeking investors. Although its yield might not be as high as Enterprise’s at present, the potential for significant recovery in share value cannot be overlooked. Enbridge is actively working to adapt its portfolio to align with evolving energy needs, ensuring its future prospects remain bright.
Considering a potential investment in Enbridge? It’s worthwhile to evaluate not just its immediate recovery potential but also its reputation as a high-yield dividend stock that can be a steady hold in your portfolio for the long term.
For insights on other promising investments, the Motley Fool Stock Advisor team recently identified ten stocks poised for significant growth, offering compelling alternatives for savvy investors. While Enbridge is not among the featured picks, understanding the broader landscape of investment opportunities can lead to better-informed decisions.
In conclusion, Enbridge represents an intriguing mix of yield and recovery potential that can appeal to both income-focused investors and those looking for long-term growth. With the energy sector continually evolving, Enbridge’s willingness to pivot could well position it as a market leader in the coming years.