Key Points
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Oil and gas pipeline stocks generate revenue based on the volume usage their pipeline networks see.
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Since demand for oil and gas logistics services is consistent, so too are the dividends — and dividend growth — from these organizations.
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Although Enbridge has proven its reliability, plenty of other companies can produce similarly sized (and surprising) net gains.
- 10 stocks we like better than Enbridge ›
Do investors make building an income portfolio more difficult than it needs to be? Many of them do.
If you feel like this could be you, there’s a simple solution hiding in plain sight. It’s an oil and gas pipeline company called Enbridge (NYSE: ENB). A commitment of just $450 per month to this oil stock could eventually turn into a six-figure stash, and perhaps more importantly, generate meaningful income when you finally need it.
Reliable persistence is the key
A pipeline company is an ideal business for producing reliable, recurring dividends. Pipeline operators aren’t impacted by the ever-fluctuating price of natural gas or crude oil. Rather, since pipeline network owners like Enbridge simply charge a flat fee based on usage volume, they’re only concerned about consumption (which remains steady).
And its business’s resiliency is evident in this company’s long-term performance. Not only has Enbridge paid a quarterly dividend like clockwork for decades now, but it has also raised its per-share payment every year for the past 31 years. Indeed, had you reinvested these dividends in more Enbridge shares, a $10,000 investment made 30 years ago would be worth a little over $206,000 now, mostly thanks to those ever-growing dividends.
Data by YCharts.
That’s an annualized growth rate of 10.6%, by the way. Assuming Enbridge stock continues to inflate its stock and its dividend payment at the same pace, investing $450 per month every month — and reinvesting its dividends — for the next 20 years would leave you with just a little less than $374,000. Moreover, based on the stock’s current forward-looking yield of 5.6%, that position could generate nearly $21,000 in annual dividend income.
Your dividend stock pick doesn’t necessarily have to be Enbridge
Past performance is no guarantee of future results, of course. On the other hand, past performance is a pretty good indication of what’s likely in the future.
Whatever happens with Enbridge going forward, this example illustrates the cumulative, compounding power of consistent dividend payments.
Should you buy stock in Enbridge right now?
Before you buy stock in Enbridge, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Enbridge wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $440,710!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!*
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.
