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Buy, Sell, or Hold Enbridge Stock

Gas pipelines
Image source: Getty Images

Written by Demetris Afxentiou at The Motley Fool Canada

There are few, if any, investments that are mentioned with such promise as Enbridge (TSX:ENB). And while there are several reasons why Enbridge stock is often mentioned, it does raise a question for prospective investors.

Should you buy, sell, or hold Enbridge stock? Let’s try to answer that question by giving a case for each.

The case for buying

Enbridge is an energy infrastructure giant that is best known for its pipeline network. That network includes both crude and natural gas elements, traversing the continent and connecting refineries, production, and storage facilities.

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That network is the largest and most complex pipeline system on the planet. It also transports nearly one-third of all North American-produced crude and one-fifth of the natural gas needs of the U.S. market.

That fact alone makes Enbridge a highly defensive pick that’s worthy of inclusion in any portfolio. But there’s still much more to love about buying Enbridge stock.

Enbridge also operates the largest natural gas utility on the continent as well as a growing renewable energy portfolio.

That renewable energy portfolio includes 40 facilities located across Europe and North America. Enbridge also continues to invest heavily in renewables. The company has dropped over $10 billion over the past two decades and plans to continue investing in growth.

In short, Enbridge is a well-diversified portfolio that has strong growth prospects wrapped in a defensive shell.

The case for selling

While Enbridge does boast multiple defensive revenue streams and plenty of long-term growth potential, potential investors should look at Enbridge’s actual growth … or lack thereof.

As of the time of writing, Enbridge stock trades flat year to date. By way of comparison, the market has inched up nearly 3% over that same period.

Turning to a longer period, the story doesn’t improve. Enbridge stock trades down over both the prior one and two year-periods by 4% and 11%, respectively.

That hardly translates into a solid growth option to buy right now, does it? Even a longer, five-year span shows the stock just barely breaking even, up a whopping 1.99%.

In other words, Enbridge stock isn’t exactly appealing for investors who are focused on growth. Those investors looking primarily at growth would be better suited to look elsewhere. (and there is no shortage of stellar growth stocks on the market right now).

Should you just hold Enbridge stock?

There’s one final view for prospective and current Enbridge stock investors to look at: holding.

Enbridge’s superb defensive appeal is balanced out by its lack of stock price appreciation. But what really sets Enbridge stock apart, and would be reason enough to hold onto the stock, is its dividend.

Enbridge pays out a very juicy, if not lucrative quarterly dividend. As of the time of writing, the yield on that dividend works out to an impressive 7.69%. This handily puts Enbridge in good company as one of the highest-paying dividends on the market.

To put that income potential into perspective, let’s consider a $35,000 investment (always as part of a larger, well-diversified portfolio). For that initial outlay, investors can expect to generate an income of $2,692.

Keep in mind that investors who aren’t ready to draw on that income yet can choose to reinvest it until needed. And it’s those reinvestments that can provide the sought-after growth by some investors.

And that’s not all.

Enbridge has provided generous annual bumps to that dividend going back approximately three decades without fail. That fact alone establishes Enbridge stock as a great option to hold in any portfolio, allowing it to grow until needed.

Whether you buy more or just hold it, in my opinion, Enbridge stock belongs in any well-diversified portfolio.

The post Buy, Sell, or Hold Enbridge Stock appeared first on The Motley Fool Canada.

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Fool contributor Demetris Afxentiou has positions in Enbridge. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

2024