Motley Fool: Embridge provides big, boring dividends

Meet energy company Enbridge (NYSE: ENB), with a recent dividend yield of 7.7%, a 29-year streak of annual payout increases and an investment-grade balance sheet. It’s perfect for some, but not all, investors.

That’s because Enbridge is built to be boring. The core of its business is one of North America’s largest energy pipeline networks. Enbridge charges fees for the use of the pipelines, storage and transportation assets it owns.

That generates reliable cash flow to support the company’s dividend payment.

Enbridge also has regulated natural gas utility operations delivering a stream of stable cash flow over time, and it has invested in both solar and wind power.

Enbridge is a well-diversified, slow and steady tortoise. That’s not a bad thing, but it won’t be ideal for every investor. Its generous dividend is likely to grow at a modest rate in the near term – but collecting 7.7% or more of your investment annually is still pretty good.

This is a reliable and slow-growing dividend stock with a high yield. But that yield is likely to make up the lion’s share of your return, and that’s not going to change much over time.

Enbridge is most appropriate for investors who place a high priority on dividend sustainability and yield. (The Motley Fool owns shares of and recommends Enbridge.)

My Dumbest Investment

Back in 1981, I invested in an Apple IIe computer. It was a bit cumbersome, but a wonder to use. My friends suggested I buy some stock in Apple.

While I did have a bit of free cash, I did not have a broker and didn’t know exactly how to invest, so I just continued playing with my new toy.

I do remember paying $1,500 (in 1981 dollars) for the machine, and I have been afraid to look up what its value would be today. – T.P., Pittsburgh

The Fool responds: According to one source, your Apple IIe could be worth several hundred dollars today if it’s in excellent condition.

But if you’d bought shares of Apple back then and still owned them, they would be worth much, much more.

Apple debuted on the stock market via an initial public offering in December 1980.

It has split its stock multiple times since then, but its average split-adjusted price in 1981 was around $0.084 per share. With the stock recently trading at over $207 per share, it’s worth more than 2,470 times as much!

Had you bought just $100 worth of shares, they would be worth more than $247,000 at this writing.

Don’t beat yourself up too much, though. The process of investing used to be much more opaque than it is now, and for many years, Apple didn’t look like it would be a great investment.

Ask the Fool

Q. Is investing in index funds enough, or should I add some individual stocks for diversification? – P.C., Elm Grove, Wisconsin

A. It depends on the funds. Index funds can be quite diversified, spreading your dollars across a wide range of securities. That’s especially true of broad-market index funds, such as ones that track the S&P 500 or the entire United States stock market. (The best index funds also sport super-low “expense ratios” – annual fees.)

Some index (and other) funds, though, focus on one region or industry only.

So even though they may invest in dozens of European or energy or financial companies, they’re not particularly diversified and they’re vulnerable to a pullback in that region or industry.

You needn’t add any individual stocks to your portfolio unless you’re hoping to juice your returns via a stellar performer or two.

But that’s far from guaranteed, and to invest in individual stocks successfully, you need to learn a lot about how to study and evaluate stocks and industries. (You might start at Fool.com in our “Investing Basics” nook.)

For most investors, low-fee, broad-market index funds are sufficiently powerful long-term wealth builders.

Q. How can I invest in renewable energy companies? – T.T., Westminster, Colorado

A. Read up on and learn a lot about the energy industry before investing in any individual renewable energy companies.

Fortunately, you can save yourself a lot of trouble by opting for a renewable energy-focused mutual fund or exchange-traded fund (ETF).

Each will invest your money in a range of companies. Look for low fees and, ideally, solid past returns relative to peers and benchmarks. Few such funds have been outstanding performers, though, because the industry is still relatively young.