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Get Big Dividends and Decent Growth Too

If you want income, check out the big dividend yields of about 6% from Enbridge (TSX:ENB)(NYSE:ENB) and Northland Power (TSX:NPI). However, no investment comes without risk, and I’ll discuss some of these below.


Enbridge has paid dividends for more than six decades and is proud to be a top 10 Canadian dividend growth stock. It has increased its dividend per share for 22 consecutive years with a 10-year dividend growth rate of 14.6%. Its quarterly dividend per share is 10% higher than it was a year ago.

At about $43.50 per share as of writing, Enbridge is a bargain dividend growth star. At this quotation, it offers a 6.16% dividend. It hasn’t had this high a yield for about two decades!

Management estimates dividend growth per share of 10% per year through 2020 with a payout ratio of less than 65% of distributable cash flow. Its payout ratio was under 60% for the first nine months of the year.

Enbridge’s recent performance looks healthy. Here are some key metrics compared to the same period in 2017 for illustration:

Q1-Q3 2017 Q1-Q3 2018 Change
Adjusted EBITDA $7,254 million $9,529 million 31%
Distributable cash flow $3,873 million $5,755 million 48%
Distributable cash flow per share $2.61 $3.40 30%
Adjusted earnings $1,969 million $3,402 million 72%
Adjusted earnings per share $1.33 $2.01 51%

In the first half of the year, Enbridge announced $7.5 billion of non-core asset sales. It received $5.7 billion of proceeds by the end of Q3. The company has improved its debt ratio to 4.7 times debt/EBITDA.

Enbridge plans to put $7 billion of projects into service this year and about 80% is already online. The assets should offset some of the cash flow lost from the asset sales. Moreover, there will be about $15 billion of projects coming online from 2019-2020.

The Line 3 replacement project accounts for more than a half of the $15 billion. So, shareholders should keep their fingers crossed that the project progresses smoothly with no hiccups.

Northland Power

Northland Power reported strong recent results. In the first nine months of the year, its free cash flow per share increased by 31% to $1.40 and its adjusted EBITDA increased by 27% to $670.2 million year over year. The stock popped 4.6% on Wednesday after reporting its Q3 results, but it still offers an attractive yield of nearly 5.6% at $21.55 per share as of writing.

Its payout ratio was about 64% of free cash flow. The company hasn’t proven itself as a consistent dividend-growth stock yet, but it has been commissioning projects on time and on budget.

One concern about Northland Power is that it’s leveraged with a debt/EBITDA of about eight. That said, management has strong ownership of 34% in the utility. So, its interest is aligned with that of shareholders.

Northland Power’s growth will come from its ability to manage its high debt levels and its ability to continue growing its operations in Canada, the United States, Mexico, Latin America, Europe, and Taiwan. Currently, its portfolio is about 40% in thermal generation, 30% and 10%, respectively, in offshore and onshore wind generation, and 5% in solar.

Investor takeaway

Both Enbridge and Northland Power have attractive growth profiles and offer decent dividend yields. However, the investments come with risks. Whichever stock you might choose to invest in, make sure to allocate a comfortable percentage of your portfolio to it.

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Fool contributor Kay Ng owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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