The regular cash distributions might entice investors, yet fail to make up for plodding share prices
The result? Long-term returns, in the case of Enbridge , that lag the diversified S&P/TSX Composite Index by a substantial margin., driving the dividend yield to a high of 7.9 per cent, after the Calgary-based pipeline operator announced a deal to acquire three U.S. natural-gas utilities from Dominion Energy Inc. for US$9.4-billion in cash and US$4.6-billion of assumed debt.priced at $44.70 each – marking a 7.2-per-cent discount to the previous day’s closing price.
The 10-year track record looks even worse. With dividends, Enbridge has lagged the index by more than 33 percentage points. This dismal performance raises the question of whether Enbridge’s dividend yield is more of a warning sign than an opportunity to score an impressive source of income.By increasing its exposure to natural gas with its latest deal, Enbridge is diversifying its operations beyond pipelines and betting on fossil fuel as an essential commodity as North America transitions from dirtier sources of energy, such as coal and oil, to cleaner renewables.
Its share price has fallen 40 per cent since the end of June – making bets on fossil fuels look almost safe by comparison.The company is standing by its commitment to raise the payout, which is something it has done each year for the past 28 years. As well, the stock’s high dividend yield may be reflecting concerns from investors about what sort of returns they can expect.
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