A 7.7% payer we watch very closely just did something weird for a stock with such a high payout: it hiked its dividend—for the 29th straight year!
Most folks will tell you a 7.7% payer with a dividend that consistently grows is a myth at best—or a “yield trap” at worst. But these hikes are just another mark on the calendar for this company’s investors.
Its latest hike—and forecast of more of the same in 2024—came out in a press release from the company late last week. The firm is a little-known (at least here in the US) natural gas shipper. It’s a savvy buy as gas prices bump along the bottom—but start to rise from the sub-$2 lows we saw earlier in ’23:
I get that this chart might make you think that we’re late to the party here. So let’s extend our view to one year back:
This, in other words, is a smart time to buy, when prices are still low but are on a sustained upward grind. You’ve no doubt heard the old saw that “the cure for low prices is low prices.” Well, this is that saying in action.
Which brings me back to that growing 7.7% “natty dividend.”
The company dishing that rich payout is Canada’s Enbridge (ENB), which has 74,000 miles of pipelines stretching across North America. It flies below the radar here in the US, but it shouldn’t: it moves about 20% of the gas used here every year.
Its “US invasion” continues: on September 4, Enbridge announced it’s buying three US utilities. When the deal closes in 2024, it will tack seven million customers in Ohio, Utah, Wyoming, Idaho and North Carolina onto the 15 million it serves north of the border.
Beyond that, ENB also has about $8 billion (Canadian) committed to in-service and under-construction renewable-power projects (and the transmission networks that serve them).
It’s a combo of scale and diversification we love to see. But before we go further, if you’re suspicious of a 7.7% payout in the volatile energy sector, I get it. But here’s the…
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