A pipeline stock with a 6% yield that could have a breakout year

The big pipeline stocks have been a great source of income for investors who don’t mind a little extra volatility. Without a doubt, the midstream plays really stand out as one of the less choppy spots in the energy patch. Anyway, I think the heavyweights in the space, like Enbridge (TSX:ENB), remain some of the bluest blue chips in the world TSX Index. And while a little turbulence could trigger a bear market, investors should view such violent declines as a long-term opportunity to lock in higher interest rates.

Headwinds in the sector and some disappointment with the quarterly results will occur at some point. But if you have a long-term investment horizon (think ten years or more), you don’t have to worry about the quarter-over-quarter or even year-over-year change in industry dynamics.

Of course, digging into quarterly earnings results when they become available can still yield big profits, especially if fundamentals have deteriorated a bit.

Enbridge stands out as a dividend blue chip that can be maintained in almost any climate

Either way, I think Enbridge stands out as one of those core investments for income investors, whether you’re looking for a fundamental TFSA play or just a name you can buy incrementally over time (think putting a small portion of each paycheck into your favorite stocks).

Be that as it may, Enbridge’s very long (think decades) annual dividend growth speaks for itself. The pipeline giant has pulled through even the industry’s worst slumps, and that’s really saying something.

Datum ItGiven its rich track record of pampering investors, I would argue that the stock should command a higher premium compared to its peer group.

Enbridge stock has been downgraded by a major company, but investors shouldn’t panic

Looking out to the next year, shares are trading for just 20.8 times forward price-to-earnings, which is a reasonable price for an income-oriented value investor. Be that as it may, expectations have steadily declined following a notable downgrade by analysts As a large, influential U.S. bank, it may be time to become a bit more bullish on the company, even as its shares struggle to break previous highs of around $70 per share.

Enbridge may face challenges as it grows this year, but such pressures appear largely already baked in after the recent “mini-correction.” Perhaps it’s the sideways action, downgrades and growing pessimism that make ENB stock such a nice, cheap breakout candidate, as it’s much easier to beat expectations when they’re a bit lower. At this point, I think the potential headwinds are a bit exaggerated, especially given the new projects investors can look forward to.

Although the bank lowered its price target to $69 per share, that level still implies a fair amount of upside potential (nearly 5%), and of course the dividend also comes on top of that.

Are there more exciting, faster growth opportunities in the market? Most definitely. But most of these don’t yield anything close to 6%, so investors interested in returns should weigh the pros and cons of waiting for confirmation of a breakout. After all, waiting for a breakout would likely mean less yield for a higher price tag.