Is Enbridge Inc.’s 12% Dividend Growth Under Threat?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) is under pressure on concerns about its dividend-growth plans. Should you be worried?

| More on:

It seems that troubles for Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock are far from over.

Enbridge, one of the most coveted names among Canada’s dividend payers, has been under selling pressure since the Bank of Canada moved from the sidelines this summer and raised interest rates twice.

The move was negative for the utility stocks, as it reduced the appeal of their investment case when the return on the risk-free government bonds began to rise.

But in the last quarter of this year, Enbridge is facing another problem, and that’s related to the future of its planned increases in dividends.

Investors and analysts have started speculating on whether or not Enbridge will make good on its 10-12% hike in dividend payouts each year through 2024 after the company failed to reiterate its guidance during its latest earning announcements.

As a result, Enbridge stock plunged more than 5% in the past five trading days, trading at $46.82 a share at the time of writing, extending its 17% decline for this year.

What is worrying investors?

The main concern affecting Enbridge’s stock performance is regarding the company’s ability to fund its $31 billion capital development program, which it announced at the time of acquiring Spectra Energy last year.

That spending is important for Enbridge after it combined its operations with Spectra’s assets as part of a $37 billion deal, which was designed to produce more cash for investors.

Investors who are bearish on Enbridge’s future prospects doubt that the company will be able to undertake this massive growth plan without either cutting its dividend or taking on more debt.

If the company borrows more, then that will have implications for its credit ratings. Moody’s Investors Service already has a negative outlook due to the company’s +$60 billion indebtedness.

Should you be worried?

I think Enbridge’s long-term value for income investors is intact, despite these short-term concerns about the future of its dividend growth.

The company, through its smart acquisition strategy, has gained an unparalleled position in the energy infrastructure space. And this strength is going to help the company to navigate through this challenging time.

If you are a long-term investor and are looking to buy a solid dividend stock, then this is a good time to accumulate Enbridge shares.

In a worst-case scenario, Enbridge might decide to meet the low end of the current 10-12% dividend-growth guidance. We will know this when the company plans to brief investors about its business in mid-December during its annual Investor Day.

Till then, I think, it is a good time to lock in a juicy 5% dividend yield from this energy giant.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Haris Anwar has no position in any stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

Read more »

A shopper makes purchases from an online store.
Dividend Stocks

3 Reasons to Buy TFI Stock Like There’s No Tomorrow

TFI stock (TSX:TFII) had a hard 2023, but now it's set up for a solid 2024, with an acquisition that…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

5 Secrets of TFSA Millionaires

These lesser-known secrets can help you set up the perfect long-term portfolio and achieve a million-dollar TFSA!

Read more »

analyze data
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

These fundamentally strong TSX stocks have paid and increased their dividend in all market conditions. Add these stocks to build…

Read more »

Canadian stocks are rising
Dividend Stocks

iShares S&P/TSX Capped REIT Index ETF (TSX:XRE): Why I Like this ETF Better Than a Rental Property

XRE is a great ETF for gaining exposure to the Canadian real estate sector.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 High-Yield Dividend Stocks That Pay Cash Every Month

These three dividend stocks all offer high yields and have sustainable dividends, making them some of the best investments to…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

3 Stocks That Could Create Lasting Generational Wealth

If you want to start transferring over your wealth, you'll need to actually have some! And these are three stocks…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »