Enbridge Inc. (TSX:ENB) is one of Canada’s leading energy infrastructure companies, transporting and distributing oil and gas in its extensive North American pipeline system. In fact, Enbridge moves about 30% of North America’s crude oil. It also transports nearly 20% of the natural gas consumed in the U.S. Enbridge’s recently released first quarter results highlight the strong demand for energy in North America. And this is good for Enbridge’s stock price (ENB).
Another quarter of solid results
Enbridge’s first quarter was another great quarter that came in above expectations. This resulted in management re-iterating its guidance, driving renewed confidence across the board. It’s clear to me that Enbridge is a TSX stock that’s steady, reliable, and predictable. Just take a look at Enbridge’s stock price history below. We can see its relatively steady performance, which is a reflection of its steady underlying business.
So, let’s take a closer look at the quarter. Enbridge was always a strong cash flow generator. This is the nature of its business. And Q1 did not disappoint. Cash provided by operating activities was a strong $3.9 billion, compared to $2.9 billion in the same period last year – up almost 35%. Also, adjusted EBITDA increased 8% and distributable cash flow increased 3%.
With this, Enbridge is heading into the rest of the year confident that it will meet its financial guidance of 4% to 6% of annual EBITDA and EPS growth, respectively, from 2022 to 2025.
Strategic initiatives
Enbridge is churning out over $11 billion in operating cash flow, money that is enabling the company to reward its shareholders and invest in its future. Speaking of the future, here are a few things that Enbridge has been working on. These are things that get me excited about the future of this company. They are the investments that will ensure that Enbridge has staying power well beyond the energy transition.
For example, Enbridge has acquired gas storage, is enhancing its liquified natural gas (LNG) export strategy, and has been awarded its sixth offshore wind farm in France. These efforts are just the beginning of Enbridge’s plans that will reposition the company and bring it to its goal of zero emissions by 2050.
Is Enbridge stock (ENB) a buy?
With Enbridge, I think we can expect more of the same. Which, by the way, is a very good thing. Because the positive qualities of this company are endless. For example, Enbridge’s results are stable even in volatile times. Also, its business is characterized as very defensive, as 98% of its cash flow is contracted and 80% of its EBITDA is inflation-protected. Moreover, Enbridge has a strong balance sheet with less than 5% of its debt exposed to floating rates.
Finally, Enbridge has 28 years of annual dividend increases under its belt. During this time period, its annual dividend has grown at a CAGR of 7.25%, to the current $3.55 per share. This alone speaks for itself and is an indication of the strong and stable business that underlies it.
In conclusion, yes, I would say that Enbridge is definitely a buy. Its current 7.1% dividend yield is very generous and financial standing remains good. Investors remain skeptical of Enbridge but in my view, oil and gas will be needed for decades to come. Simply put, Enbridge (ENB) is a TSX stock that’s undervalued at these levels.
