Should You Include Enbridge In Your Portfolio With Its 7% Yield?

If you're looking to buy a high yielding quality dividend stock, there aren't many options these days. After a year of relentless market growth, some of the best dividend stocks are now only offering low, single-digit returns.

Companies included in the S&P 500 Index pay only 2% dividend yield on average. But if you're willing to broaden your horizons and look beyond the US markets, there are some companies that still offer good returns and are not so risky. One high-yielding opportunity in the Canadian market is Calgary-based Enbridge (NYSE:ENB). The energy sector company is North America's largest gas and oil pipeline operator.

Wide Economic Moat

Research proves that companies that provide essential services such as electricity, gas, telecoms and healthcare outperform economic downturns and recessions. These companies continue to generate cash flow and distribute most of it through dividends. In addition, Enbridge has a broad economic moat, a term used by Warren Buffett to describe businesses that have a wide competitive advantage. The company operates in North America, fueling the economy and meeting the energy needs of consumers. Enbridge ships about two-thirds of Canada's crude oil exports to the United States, supplies about 20% of the natural gas consumed in the United States, and operates North America's third-largest natural gas enterprise by number of consumers.

Strong Cash Flow

Enbridge's cash flow is diverse and comes from many businesses and geographies, enabling the company to weather the economic downturn better than other companies. The company's priorities include increasing dividends, completing a major oil pipeline expansion project this year, and expanding its renewable energy business.

Dividend History

ENB, whose shares closed at $39.53 on Monday, has a solid payment history. It has increased its dividends by 10% annually in the last 26 years. Currently, the company's annual dividend yield is about 7%, which translates to a quarterly payment of $0.6675. The company estimates that it will increase distributable cash flow by 5% to 7% by 2023. It also aims to pay 60% to 70% of its DCF as dividends, thus making the payments sustainable. Enbridge stock was up strong this year, gaining 23%, far surpassing the yield provided by the iShares US Utilities ETF (NYSE:IDU). Despite this impressive work, the dividend yield remains attractive. ENB stocks are suitable for investors who want to have a solid stock in their portfolio.