As an investment, Enbridge Inc. doesn't excite the pulse. Pipelines are just glorified pipes, after all. And if you entertain dreams about scoring big on one of your investments, Enbridge is one of the least likely stocks to satisfy those ambitions.
In fact, Enbridge is a stock for people who dream small, due to its steady nature. But in an interesting twist, these small dreams have been paying off in a big way recently.
This year, the shares have risen about 7 per cent after you factor in dividends, well above the zero return for the S&P/TSX composite index and the 3-per-cent dip for the energy index (in which it resides).
The longer term looks even better. Enbridge has rewarded investors - practical, safety-comes-first types, no doubt - with a 36-per-cent gain (again, after taking dividends into account). That's nearly triple the return of the benchmark index. And over the past five years, Enbridge has returned a remarkable 77 per cent, also walloping the broad index and the energy index over the same period.
Why is dull looking so good? The answer is not complicated. Enbridge has been generating consistently higher earnings and revenues at a time when consistency has become highly valued.
In fact, analysts have been able to predict quarterly earnings almost exactly, with a low "surprise rate" over the past five years. That means the company's quarterly earnings reports don't generate much anticipation among investors, but who needs such excitement when your wealth is ticking steadily higher?
Meanwhile, Standard & Poor's pointed out this week that the financial crisis and ensuing recession upheld the image of pipelines as paragons of stability, maintaining unfettered access to capital markets and steady credit ratings.
And then there is Enbridge's dividend, rising like clockwork every year so that the quarterly payout is now 70-per-cent higher than it was just five years ago. The stock's current yield: An attractive 3.3 per cent.
With the global economy looking increasingly fragile these days, and even the U.S. Federal Reserve looking a little worried about the prospect of sluggish economic growth or even a setback, dull and predictable stocks like Enbridge should continue to amaze investors - especially those who dream small.
David Berman