Should You Buy Enbridge For Dividends? (Case Study)

Enbridge has always been a Canadian favourite stock.

Enbridge is one of my all-time favourite dividend stock picks in the TSX market.

There are not many stocks like Enbridge, considering what it offers. 

In case you are just starting to invest, you can probably consider investing in Enbridge. The stock is trading in the $40s and averaging out the buying price point can seriously benefit you for the long term. 

Consider buying 1 or 2 shares every month and adding it to your portfolios. (Or the way you wish to)

Quick Quote from Enbridge website:

Enbridge has paid dividends for over 65 years to its shareholders. In December 2019, we announced a 9.8% increase to our dividend per share, increasing the quarterly dividend to $0.810. This translates into a $3.24 dividend per share on an annualized basis for 2020. Over the past 25 years, the dividend has grown at an average compound annual growth rate of 11%

Enbridge stock’s dividend increases over the years: (65 years and still counting!)

That’s 65 years of consistent dividend payments and increases (At CAGR of more than 11% annually).

Now, that’s really awesome guys! 

In case you’re wondering what CAGR means,

Here’s an example from Investopedia: 

Imagine you invested $10,000 in a portfolio with the returns outlined below:

• From Jan 1, 2014, to Jan 1, 2015, your portfolio grew to $13,000 (or 30% in year one).

• On Jan 1, 2016, the portfolio was $14,000 (or 7.69% from Jan 2015 to Jan 2016).

• On Jan 1, 2017, the portfolio ended with $19,000 (or 35.71% from Jan 2016 to Jan 2017).

Are the dividends everything about Enbridge or do we have anything more?

Enbridge Stock Overview 

Like I said earlier, every Canadian Investment portfolio should have a bite of ENB. (that’s the TSX ticker symbol for Enbridge). 

Enbridge is a Canadian Blue Chip. It is extremely stable and the dividends are paid out on time once every 3 months. (or quarterly dividend payouts)

In case you are very new to the investing world and this is your first article.  

Dividends are free cash from the company that hits your bank account once every month or once every few months.

In this case, once every 3 months. 

All you have to do is to hold the stocks in your investment accounts on or before the dividend payout record date to be eligible for the dividend payments. 

Enbridge Stock Market Chart: (5-year chart)

That’s not very interesting, right? (Stock’s growth trajectory, I mean)

The stock is trading in the same range for the past 5 years. $35 – $60 almost. 

Based on today’s market price of $40.72 Canadian, the dividend yield works out to be 7.96%. Not bad! That’s Excellent in fact. 

Enbridge Stock dividend growth case study (CAGR)

Say you bought the Enbridge stock around the beginning of 2017 at the price of around $45 (average)

Initial investment: $10,000

Stock Price: $45

Unit purchased: $10,000/45 = 222 shares

2017 Annual Dividend: $2.4130

2018 Annual Dividend: $2.6840

2019 Annual Dividend: $2.9520

2020 Annual Dividend: $3.2400 

Now, considering you held the shares for 4 years with no increase or decrease in the number of shares.

Your Total dividend’s earned will be: (year wise):

2017: $535

2018: $595

2019: $654

2020:  $719

Did you notice the divided increase over the years (YOY)?

Compared to 2017,  you are now getting almost 35% more dividends in 4 years. (that’s extra free money for you.)

The Total dividend earned over 4 years: $2503 Canadian dollars for your initial $10,000 invested. 

That works out to be almost $59 per month of free cash flow in 2020 for the 10,000 you initially put into. 

So Should you Invest in the Enbridge stock? 

I’ll say yes. 

Remember, the $59 per month we spoke about, that will be paid once every 3 months (59*3*4 times a year). 

Instead of keeping money in your bank’s chequing/saving accounts, you can probably average out the dollar cost and buy ENB stock in dips. 

Remember, the dividend will keep growing every year. That’s the beauty of holding the Enbridge stock for the long period. 

 

In the above chart, just look at the 2010 dividend, it is at $0.8500.

Today 10 years or a decade later it is $3.24 per share. That’s an increase of almost 4X just in terms of dividends alone. 

Conclusion 

In this article, I tried to educate my newbie readers on the beauty of holding stable and excellent Blue Chip stocks such as Enbridge. 

Instead of parking money in your Bank’s Chequing/Savings accounts or any of the online digital banks for penny interest rates, investing in high dividend Blue Chip’s such as Enbridge is definitely worth considering. 

I hope this post added some value and made you think otherwise. 

Thanks for reading. Please let me know your thoughts and comments below. 

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