The energy space has been a slaughterhouse for investors this past year. Along with huge price declines, many energy companies have cut their dividends. Yet some have managed not only to maintain their dividends, but increase them.
As the oil price has fallen, all energy stocks have fallen. Dividend and value investors alike might find a company or two for their long-term portfolios. Lower prices imply more value for the future should energy prices rebound. At the same time, lower prices and rising dividends result in higher yields.
Although energy infrastructure companies have declined in price along with other energy companies, their dividend growth has continued to be the highest in the energy space.
Enbridge has the highest growth
Enbridge Inc. (TSX:ENB)(NYSE:ENB) has paid dividends for 62 years and has paid growing dividends for 19 consecutive years. This year it increased the dividend by 32.9%.
It also announced a dividend hike of 14% for the first quarter of 2016. Its quarterly dividend will be increased from 46.5 cents to 53 cents per share.
Because of the dividend hike and a price decline of 35% from a 52-week high of $66, Enbridge has a yield of 5% at about $42.50 per share.
TransCanada has an S&P credit rating of A-
TransCanada Corporation (TSX:TRP)(NYSE:TRP) has paid growing dividends for 14 consecutive years. This year it increased the quarterly dividend by 8.3% from 48 cents to 52 cents per share.
TransCanada has experienced a nice rebound of over 6% in the past couple days. So, more people than not are calling it a value play at these levels. The shares are still 20% down from its 52-week high.
TransCanada yields 4.4% at $47. The company should announce another dividend raise of 8-10% for the first quarter of 2016 soon.
Both Enbridge’s and TransCanada’s dividends are supported by current earnings and cash flows. However, there’s a possibility that their growth could slow due to the negative outlook of the energy sector.
Inter Pipeline
Inter Pipeline Ltd. (TSX:IPL), another energy infrastructure company, increased the dividend by only 6.1% this year; compare this with last year’s raise of 14%. Lower dividend growth can mean that the company is acting more prudently in the current low oil price environment, or it could be due to slower growth.
Inter Pipeline has increased the dividend for six consecutive years. At $21, it yields 7.4%.
Conclusion
All of these energy infrastructure companies have generously increased their dividends this year despite the gloomy situation. By hiking dividends prudently, they’re sharing profits with shareholders. Enbridge has higher growth than TransCanada because Enbridge uses higher financial leverage to grow its business. So, TransCanada is the safer pick.
