Consider incorporating these two stocks into your portfolio if your investment timeframe spans decades. The usual holding duration for supplies has steadily declined to less than a year. Holding stocks for such brief periods implies that investor sentiment is possibly the chief factor affecting performance.
However, extending your holding period allows you to tap into the fundamental strength of a business. If your vision extends to decades or possibly holding a stock “in perpetuity,” Enbridge (NYSE: ENB) and Steel Dynamics (NASDAQ: STLD) warrant a look today as they lay foundations for the future.
1. Adapting to Change
Enbridge is one of North America’s largest midstream energy enterprises headquartered in Canada. It offers an attractive dividend yield of 7.1%, which has seen annual increases for 28 consecutive years. Enbridge primarily earns revenue by charging fees to companies transporting oil and natural gas via its infrastructure assets.
However, the real question for a long-term investor is, what does the future hold? Some indications are apparent. For instance, oil pipelines account for about half of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Despite this, this business line is projected to take up only around 1% of the company’s current capital investment budget.
In comparison, natural gas (incorporating pipelines and a natural gas utility operation), contributing about 45% of EBITDA, is set to attract around 80% of Enbridge’s investment expenditure. Natural gas is anticipated to be a transition fuel as the world shifts towards cleaner alternatives.
Finally, the company’s relatively tiny clean energy segment, contributing about 3% of EBITDA, will receive the remaining capital expenditure. Proportionally, the clean energy segment’s share of capital investment will be approximately four times its current portfolio contribution.
This high-yield energy stock offers a steady and growing dividend even as it adjusts to the changing world. While short-term issues, like exchange rates and competition from new pipelines, have pressured the stock, long-term investors may still find it appealing as it employs carbon energy profits to facilitate its transition towards cleaner options.
2. Introducing a New Pillar
Steel Dynamics, one of the younger U.S. steel companies with its inception in 1993, has rapidly expanded to become one of the sector’s key competitors. Its business is built around a portfolio of electric arc mini-mills, generally more flexible than older blast furnace technology, allowing it to remain profitable throughout the industry’s cyclical nature.
Evidence of the company’s success is visible in its dividend, which has seen annual increases for 13 years. However, the compelling tale lies in the dividend growth rate, averaging over 20% in the past decade! The company’s drive to build new steel mills and use its steel to manufacture higher-margin products has significantly propelled this success, with these endeavours persisting.
What is particularly interesting today is Steel Dynamics’ perception of an investment opportunity in the aluminum market, reminiscent of what it capitalized on in the steel market (undersupply and growing demand). Therefore, it is constructing an aluminum mill, providing another growth propellant for its business. Though not yet operational, it is slated to commence in mid-2025.
While Steel Dynamics’ shares are seldom cheap, a roughly 20% decrease since a peak in March 2023 could signal an opportune moment to begin forming a long-term position in this swiftly expanding metals company as it ventures into a fresh market to sustain long-term growth.
Thinking Ahead
Businesses fluctuate over time, making it nearly impossible to pinpoint the perfect buying moment. However, investing in solid companies and sticking with them over the long haul can yield substantial rewards. The trick is to remain patient enough to reap the benefits of the foundational growth companies like Enbridge and Steel Dynamics are establishing.
Enbridge and Steel Dynamics present compelling cases with a long-term investment strategy in mind. They exhibit proven track records, commitment to future growth, and demonstrate adaptability to market changes. Whether you’re drawn to Enbridge’s transition towards clean energy or Steel Dynamics’ ambitious expansion into the aluminum market, these stocks offer potential for significant returns over time. Now may be the opportune moment to incorporate these robust stocks into your investment portfolio and patiently witness their growth in the future.
