Although Enbridge (TSX:ENB) has strong attributes, such as a high dividend yield and a robust infrastructure network, potential risks and challenges may lead some investors to explore other dividend-paying stocks with more stable and sustainable prospects.
If you are seeking dividends, there is another stock that offers both returns and dividends. This stock is a dividend giant that may be a preferable option over Enbridge stock.
Why not Enbridge stock?
Investors may want to avoid Enbridge stock for several reasons. The global transition to renewable energy away from fossil fuels could impact Enbridge’s long-term growth prospects. As demand for traditional oil and gas infrastructure companies declines, Enbridge may experience decreased revenues.
Additionally, Enbridge carries a substantial amount of debt, with a debt-to-equity ratio of approximately 1.3. High debt levels, especially in a rising interest rate environment, pose risks to the company’s financial stability.
Moreover, Enbridge has encountered regulatory hurdles and legal challenges, leading to delays and increased costs for projects such as the Line 3 Replacement Project.
Enbridge’s high payout ratio of around 135% indicates that the company pays out most of its earnings as dividends, leaving little room for reinvestment or financial flexibility. Despite a 7.59% yield, investors may want to consider alternatives.
Infrastructure
Infrastructure assets offer essential services critical to economies and societies, providing relatively resilient revenue streams. Brookfield Infrastructure Partners (TSX:BIP.UN) is a solid option in this sector.
BIP owns and operates a diverse portfolio of high-quality infrastructure assets globally, generating stable and predictable cash flows through long-term contracts or regulated frameworks. The company also has a track record of acquiring and integrating infrastructure assets for growth.
With a dividend yield of 5.76% and a history of consistent dividend increases, BIP presents a compelling investment opportunity. The company targets distribution growth of 5-9% annually, demonstrating its commitment to shareholder returns and long-term growth.
Bottom line
While Enbridge stock has been a significant dividend player in the past, investors seeking a reliable income stream and growth potential may find Brookfield Infrastructure Partners to be a more attractive option. With its diversified asset base, stable cash flows, growth opportunities, and attractive valuation, BIP stock offers a compelling investment case for those looking for long-term growth and income stability.
