This Overlooked Pipeline Stock Could Quietly Make You a Fortune
Key Points
Many investors seek out growth stocks as a means of building wealth.
The compounding effect of reinvested dividends, however, can often be just as effective with much less volatility.
Oil and gas pipeline operators manage some of the world's most consistent profit-generating cash flow business.
- 10 stocks we like better than Enbridge ›
If you're looking to invest your way to serious wealth, you're probably a fan of growth stocks. And understandably so. By definition, they're supposed to dish out big gains.
Just don't dismiss the power of steady, cumulative dividend growth. If you pick the right payer, you can also ride these holdings to a sizable fortune.
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And one particular oil and gas pipeline name proves it. Better still, it could continue proving it to patient newcomers. That company is Enbridge (NYSE: ENB).
The business is simple enough: It owns and operates over 18,000 miles of crude oil and natural gas pipelines in Canada and the U.S., handling nearly 5 billion barrels/equivalent every year.
Unlike the energy industry's explorers and refiners, though, Enbridge isn't affected by the price of the gas or oil it transports. It simply charges an ever-rising fee for the amount of product pushed through its pipes.
As long as North America continues consuming crude oil and natural gas, Enbridge continues generating revenue -- which turns into profits, which turn into dividends. That's how the company has not only paid a quarterly dividend like clockwork for decades, but has also raised its annual per-share payout every year for the past 31 years -- and by more than a little. Since 1995, the dividend has risen by an average of 9% per year.
You wouldn't have needed to accept those dividend payments, too. The chart below illustrates the upshot of reinvesting any dividend payments on an initial investment of $10,000 in Enbridge made 30 years ago. Today, that position would be worth more than $228,000.
ENB data by YCharts.
Past performance is no guarantee of future results, but past performance is a reasonable indication of what's likely in the future. And it's not like demand for natural gas or crude oil is drying up anytime soon. Enbridge could conceivably repeat the feat over the next 30 years.
More than anything, though, don't dismiss the impact of compounding provided by steady cash payments, even if they seem small at the time.
Should you buy stock in Enbridge right now?
Before you buy stock in Enbridge, consider this:
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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.
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