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Is Enbridge Inc (NYSE:ENB) the Best Canadian Energy Dividend Stock to Buy Now?

Fahad Saleem
·4-min read

Enbridge Inc (NYSE:ENB) ranks 7th in our list of the Best Canadian Dividend Stocks for Income Investors.

Click to see the full list of 8 Best Canadian Dividend Stocks for Income Investors.

Before analyzing Enbridge Inc (NYSE:ENB), let's analyze the state of Canadian dividend investing strategies and their returns so far this year.

Canadian dividend stocks have always lured income investors, thanks to their attractive yields and stability. As inflation in North America remains sticky and rate cuts farther than expected, dividend stocks are continuing to gain market attention. In the first quarter of 2024, S&P/TSX Composite Total Return Index returned 6.6%, while the index's return last year stood at 11.8%. Canadian stocks have been performing well this year. A detailed report by ClearBridge Investments said that nine out of 11 sectors in Canada posted positive returns in the March quarter, with healthcare, energy and industrials leading the pack.

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The report said that the AI-led rally that pushed stocks higher in later 2023 has shown its effects in 2024 as well. ClearBridge believes investors appear to be "less mindful" of downside risks in the market. The report said that some equity valuations are depicting "uncomfortably high"  expectations. ClearBridge also said its Dividend Strategy underperformed its S&P/TSX Composite Total Return Index benchmark during the first quarter. The strategy was invested in nine sectors in the period, out of which six sectors generated gains. Energy, Financials and Industrials were the biggest contributors, while the Communication Services took a toll on overall returns.

While ClearBridge's dividend strategy underperformed its benchmark index, there are several other Canadian dividend portfolios that have been posting upbeat returns. For example, The Morningstar Canada Income Pick List Strategy, which consists of high-yield Canadian dividend stocks with strong analyst ratings,  outperformed the S&P/TSX 60 Index during the month of April, albeit with a thin margin. The strategy posted a return of -2.1% in April, compared to the benchmark's return of -2.2%.

Lorne Steinberg, President, Lorne Steinberg Wealth Management, during an interview with Bloomberg, recently recommended investors to pile into high-yield Canadian dividend bank stocks. The analyst said that over the past several months US banks and broader market ETFs have seen a huge inflow of funds, and Canadian banks have underperformed their US peers. However, Steinberg believes the market has "ignored" Canadian banks despite the fact that their performance is almost similar to their US peers, barring a few exceptions like JPMorgan. The analyst also said that Canada is still a "growth country" where the citizens are getting wealthier, which could bode well for Canadian bank stocks, which he believes would keep seeing earnings growth over the next few years.

Photo by Annie Spratt on Unsplash

Enbridge Inc (NYSE:ENB)

Number of Hedge Fund Investors: 32

With a dividend yield of about 7% and a PE ratio of 19, energy pipeline company Enbridge Inc (NYSE:ENB) is one of the most popular Canadian dividend stocks among elite hedge fund investors. Enbridge Inc's (NYSE:ENB) dividend yield is almost twice the industry average of 3.5%. Enbridge Inc (NYSE:ENB) has increased its dividend without a break since 2003.

Enbridge management talked about dividends and the company's financial situation during its latest earnings call:

"Our leverage guardrails of 4.5x to 5x debt to EBITDA remain in place and are supported by our industry leading low risk business model. The sale of our interest in Alliance/Aux Sable reinforces the balance sheet and ensures continued financial flexibility ahead of the Questar and PSNC closings this year. As I read last quarter and emphasized to Enbridge Day, our focus remains grounded in capital prudency.

Our value proposition has always been underpinned by a ratable growing dividend. We’ve distributed $34 billion to our shareholders over the past five years alone. And looking ahead, we expect that figure to grow to roughly $40 million over the next five years, while maintaining our 60% to 70% DCF payout range. We’re able to achieve that thanks to the visibility and duration of our multiyear growth outlook. We plan to spend $6 billion to $7 billion per year on our secured growth program and while we have additional capacity, we don’t need to spend it to achieve our growth targets."

Read the full earnings call transcript here.

A total of 32 hedge funds tracked by Insider Monkey reported owning stakes in Enbridge Inc (NYSE:ENB). The biggest stake in Enbridge Inc (NYSE:ENB) is owned by Ken Griffin's Citadel Investment Group which owns a $46 million stake in Enbridge Inc (NYSE:ENB).

Enbridge Inc (NYSE:ENB) ranks 7th on our list of the 8 Best Canadian Dividend Stocks For Income Investors.

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.