A big-time oil-fueled dividend
Matt DiLallo (Enbridge): This year has been a turbulent one for the oil patch as crude prices have tumbled, taking production volumes down with them. That's having an impact on some pipeline companies, which have seen their cash flow squeezed by falling volumes.
However, it's not affecting Enbridge one bit. That was evident during the first half of the year as its cash flow came in slightly ahead of its expectations thanks to the overall resilience of its business model. Because of that, it's still on track to meet its full-year forecast.
Despite that durability, shares of Enbridge have fallen about 20% this year. That has pushed its dividend yield up to an attractive 7.6%. While a payout that high is sometimes a cause for concern, that's not the case for Enbridge. That's because it has a relatively conservative dividend payout ratio of around 65% of its cash flow, and it has an investment-grade balance sheet backed by a leverage ratio below its target range.
That solid financial profile gives Enbridge the financial flexibility to continue expanding its operations. The company currently has several billion dollars' worth of projects under way, which it expects will fuel mid-single-digit annual cash flow growth for the next several years. That should enable Enbridge to continue increasing its already attractive dividend, which it has done for the past 25 years.
With a high yield, lower share price, and visible growth, Enbridge is an excellent oil stock to buy this month, especially given its resilience to this year's turbulent market conditions.
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