Pipeline Pembina (TSX: PPL) (NYSE: PBA) is trading at $ 40 per share at the time of writing and offers a dividend yield of 6.25%. The stock price is down a bit from the recent high. Any further fall should be considered a good entry point.
Pembina Pipeline has a proven track record of growth over the past 60 years and the company currently has a comprehensive list of acquisition targets and organic projects. Management has reached an agreement to buy Inter-pipeline for $ 8.3 billion. Pembina Pipeline is also partnering with various First Nations groups focusing on a new LNG project and a potential bid for the government-owned TransMountain pipeline.
Pembina Pipeline intends to increase the dividend by nearly 5% upon closing of the Inter Pipeline transaction. As new assets are purchased or projects come into service, the dividend is expected to continue to rise in the years to come.
The stock was trading at $ 53 before the pandemic, so there is a decent upside opportunity from the current stock price.
Enbridge (TSX: ENB) (NYSE: ENB) is a North American energy infrastructure giant with a market capitalization of $ 100 billion.
The size of the company gives it the financial firepower to make major acquisitions. This could become more common over the next few years as consolidation intensifies in the industry. Existing oil and gas pipelines are valuable assets in an environment where it is difficult to get approved and build new major projects.
Enbridge transports approximately 25% of the oil produced in Canada and the United States and transports approximately 20% of the natural gas consumed south of the border. The current investment program is more focused on the transport and distribution of the company’s gas. Investments in renewable energy assets are also expected to increase.
Enbridge increased the dividend in 2020 despite the difficult environment for the pipeline group. A rebound in fuel demand this year should bring throughput back to traditional levels. Enbridge shares are trading at nearly $ 49 a share at the time of writing and offer a dividend yield of 6.75%.
The stock is up 20% in 2021. Any downturn should be seen as a buying opportunity. The recovery in the energy sector is only in its early stages and this stock could easily climb to $ 55 over the next six to 12 months. If the stock price stays close to the current level, investors get a great return from the generous dividend.
Growth in distributions may not be at historical levels over the next several years, but investors are expected to see payment increase in line with expected growth in distributable cash flow of 5-7%.
The net result on the highest dividend-paying stocks
Pembina Pipeline and Enbridge still look cheap, even after strong rallies this year. A drop in stock prices should be a great entry point for income investors to create new positions or add to those already held in a Tax Free Savings Account (TFSA) or RRSP. Companies are giving out generous distributions that are expected to continue to grow for years to come.
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The Motley Fool owns shares and recommends Enbridge. The Motley Fool recommends PEMBINA PIPELINE CORPORATION. Foolish contributor Andrew Walker owns shares of Pembina Pipeline and Enbridge.