Unique Investment Opportunity: Top High-Yield Dividend Stock to Purchase and Hold Long-Term in April

Unique Investment Opportunity: Top High-Yield Dividend Stock to Purchase and Hold Long-Term in April

Enbridge (NYSE:ENB) has been an exceptional investment over the decades. The Canadian pipeline and utility operator has generated a compound annual total return of more than 11% over the past 20 years. This exceeded the S&P500 and its annualized total return of almost 10%, and its peers in the utilities and midstream sectors, with an average annual total return of around 8%.

The energy infrastructure company could generate even higher overall returns in the years to come. One factor fueling this view is its ability to pursue a “once-in-a-generation” acquisition opportunity that it will close in stages this year. This deal will improve its operations and growth profile, giving it more fuel to increase its dividend by 7.5%.

Seize a unique opportunity

Last September, Enbridge agreed to buy three gas plants utilities Since Domination for 14 billion dollars. The transaction will create the largest natural gas utility platform in North America, with 7 million customers. She pays a very reasonable price for utilities, about 1.3 times what they cost. enterprise value-at the tariff base and 16.5 times price/earnings ratio.

“Adding natural gas utilities of this scale and quality, at a historically attractive multiple, represents a once-in-a-generation opportunity,” CEO Greg Ebel said in the press release unveiling the transaction. He further noted that Enbridge expects the transaction to be accretive to its distributable cash flow per share in the first year of full ownership, which is expected to increase over time, fueled by its strong growth profiles.

Enbridge recently completed the purchase of The East Ohio Gas Company, the first of its three gas utility acquisitions from Dominion. “The addition of a strong Ohio-based gas utility company is an excellent strategic move for Enbridge. This further diversifies our business and improves the stable cash flow profile of our assets,” said Michele Harradence, President of Gas Distribution and Storage at Enbridge. . Harradence added: “Natural gas utilities have a long useful life and are “must-have” infrastructure for providing safe, reliable and affordable energy. This gas utility will help us combine and extend our cash flow growth prospects through the end of the decade by adding a stable, regulated investment that supports our long-term dividend profile.

The fuel to increase shareholder value

Enbridge plans to complete the two other gas utility acquisitions from Dominion later this year. Once this is done, the company will receive 22% of its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of the very stable gas utility sector. This will further diversify its business mix while reducing the profit contribution of its liquids pipelines segment to 50% of the total, with the remainder coming from gas transportation (25%) and renewable energy (3%).

The transition to low-carbon energy will pay off in the long term. This should provide Enbridge with additional growth opportunities.

This has already been the case this year. The company recently formed a gas pipeline and natural gas storage joint venture connecting the Permian Basin to the U.S. Gulf Coast region. This deal will further diversify its cash flow and provide a near-term boost with potential for future growth.

These investments have helped improve the visibility of Enbridge’s long-term growth. The company expects to grow its adjusted EBITDA by 7% to 9% annually through 2026, with its distributable cash flow increasing by about 3% per share, slowed in the near term by tax changes and a number more high number of shares payable. for Dominion transactions. At the same time, easing headwinds should help accelerate cash flow per share growth by 5% per year after 2026, with adjusted EBITDA likely to increase at a similar rate.

Add Enbridge’s already high 7.5% dividend yield to its growing cash flow per share of 3% to 5% per year over the long term, and the company should produce total annual returns of between 10% and 12 %. This is a very good yield for such a low-risk dividend stock.

An incredible investment opportunity

Enbridge is taking advantage of a unique opportunity to acquire three high-quality gas utilities. These operations will significantly improve its cash flow sustainability and growth profile. Add in its other growth drivers and Enbridge should have the fuel to produce strong long-term overall returns. This makes it a great stock to buy and hold for the long term this month, especially for those looking for an attractive and growing source of income.

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Matt DiLallo holds positions at Enbridge. The Motley Fool has positions with and recommends Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

A Once-in-a-Generation Investment Opportunity: 1 High-Yielding Dividend Stock to Buy Now and Hold Forever in April was originally published by The Motley Fool

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