Daily Stock Pick for May 31, 2023

Energy was the top sector of 2022 thanks to the war in Ukraine – the single bright spot in the worst market conditions since 2008.

But just like how the tech highs of 2021 eventually came back down to earth, we’ve also seen a correction in energy stocks, with XLE – the Energy Select Sector SPDR Fund – down about 8% in 2023 and about 11% from a year ago.

The good news is that, unlike tech, many of the names in the energy space are solid companies with healthy cash flows that they’re only too happy to share with their shareholders. And with valuations having come down, now may be a good time to get in on some of these names.

Today’s daily stock pick is a stock that is currently yielding over 7%, making it a great pick for income-focused investors. It’s also quickly diversifying its business – opening up new earnings channels that could translate into significant capital appreciation.

Enbridge Inc. (ENB)

Enbridge, headquartered in Canada, is an owner of oil and natural gas pipelines, natural gas storage facilities, natural gas utilities, an oil export terminal, and other renewable energy assets. It is very much a diversified player.

Its most attractive quality currently is no doubt its dividend yield – standing at 7.3% as of today. It’s never missed a dividend in the past 10 years, and while the dividend payout trend has not been a straight upward line, it has generally been increasing.

For context, its dividend per share 10 years ago was $0.31, its last dividend was $0.66 per share, and the highest dividend it has ever announced was $0.69 per share 2 years ago.

Earnings-wise, Enbridge has been consistent – with its most recent quarterly profits coming in at $1.7 billion (flat year-on-year) with $3.2 billion in distributable cash flow (up by $100 million from a year ago).

The good news is that Enbridge is continuing to build out its assets – particularly its renewable business, which it sees as being able to generate long-term cash flows.

The biggest risk in this stock is its high debt load. But considering its track record, Enbridge looks like a solid dividend play with long-term potential and a currently attractive entry opportunity.

To your wealth,
Felix @ Ace of Investing