A 6% Yield Pipeline Stock That Could Have a Breakout Year

The big pipeline stocks have been a great source of income for investors who don’t mind a bit of added volatility. Undoubtedly, the midstream plays really do stand out as one of the less choppy places to be in the energy patch. Either way, I do think that the heavyweights in the space, such as Enbridge (TSX:ENB), continue to be some of the bluest blue chips in all of the TSX Index. And while a bit of turbulence could bring forth a bear market, investors should treat any such violent declines as a long-term opportunity to lock in a higher yield.

Indeed, industry headwinds and the odd quarterly earnings disappointment are going to happen at some point down the line. But if you’ve got a long-term investment horizon (think 10 years or more), you don’t have to concern yourself with the quarter-to-quarter or even the year-to-year change in industry dynamics.

Of course, it can still pay major dividends to dig into the quarterly earnings results as they come due, especially if the fundamentals have taken a bit of a turn for the worse.

Enbridge stands out as a dividend blue chip to hold through almost any climate

Either way, I think that Enbridge stands out as one of those core holdings for income investors, whether you’re looking for a foundational TFSA play or just a name to buy incrementally over time (think putting a small portion of every paycheque into your favourite stocks).

In any case, Enbridge’s very long (think multiple decades) annual dividend growth streak speaks for itself. The pipeline giant has come through, even through the worst of industry slumps, and that really does say something.

Given its rich track record of spoiling investors, I’d argue the stock should command a heftier premium relative to the peer group.

Enbridge stock downgraded by a big-name firm, but investors shouldn’t panic

Looking into the next year, shares go for just 20.8 times forward P/E, which is a reasonable price point for an income-oriented value investor. In any case, with expectations steadily coming down after a notable downgrade from analysts over at a big, influential U.S. bank, it might be time to get a bit more bullish on the firm, even as its shares struggle to break out past prior highs near $70 per share.

Enbridge might face challenges as it grows this year, but such pressures already seem mostly baked in after the recent “mini-correction”. Perhaps it’s the sideways action, downgrades, and growing pessimism that make ENB stock such a nice low-cost breakout candidate, given it’s far easier to top expectations when they’re somewhat lower. At this juncture, I think potential headwinds are a bit overblown, especially given the new projects investors can look forward to.

Though the bank reduced its price target to $69 per share, that level still implies a good amount of upside from here (close to 5%), and, of course, there’s also the dividend added on top.

Are there more exciting, timelier growth plays on the market? Most definitely. But most of them don’t yield anything close to 6%, so investors interested in the yield should weigh the pros and cons of waiting for confirmation of a breakout. After all, waiting for a breakout would likely entail less yield for a higher price tag.

The post A 6% Yield Pipeline Stock That Could Have a Breakout Year appeared first on The Motley Fool Canada.

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More reading

• 2 Canadian Dividend Stars That Are Still A Good Price
• Best Stock to Buy Right Now: Enbridge or TC Energy?
• 3 Dividend Stocks to Double Up on Right Now
• 5 TSX Dividend Champions Every Retiree Should Consider
• Your First Canadian Stocks: How New Investors Can Start Strong in 2026

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.