Boasting a solid track record of uninterrupted payouts of 69 years, 29 consecutive years of dividend increases, a high yield of over 7.7%, and visibility over its future distributable cash flows (DCF), Enbridge (TSX:ENB) emerges as a no-brainer dividend stock. The company operates an energy infrastructure business and transports oil and gas.
Enbridge’s highly diversified revenue streams and durable earnings growth enable it to pay and increase its payouts regardless of economic and commodity cycles. For instance, the company even paid and increased its dividend during the 2008 economic recession and COVID-19 pandemic. Notably, most energy companies suspended or announced dividend costs during these periods. This highlights the company’s solid fundamentals, resilient business model, and commitment to return higher cash to its shareholders.
With this backdrop, let’s explore why investing in Enbridge stock will enable you to earn worry-free dividend income.
Why bet on Enbridge stock?
Enbridge owns high-quality energy infrastructure assets and plays a key role in the North American energy value chain. This ensures consistently high utilization of its assets, enabling the company to generate strong DCF regardless of market conditions.
Moreover, the company’s management prioritizes dividend growth as a core element of its investor value proposition. This commitment to return cash to its shareholders suggests that Enbridge could continue to increase its dividends in the upcoming years. Additionally, ENB’s targeted payout ratio of 60 to 70% of DCF appears viable in the long run. These favourable factors reinforce my optimistic outlook and make Enbridge a top dividend stock.
Looking ahead, Enbridge’s $25 billion secured growth backlog represents a tangible pipeline of future projects. This backlog will ensure a steady stream of revenue generation in the years ahead. Moreover, Enbridge’s $19 billion acquisition of three U.S. gas utilities enhances the company’s market presence and diversifies its revenue streams.
Enbridge expects its earnings per share (EPS) and DCF per share to increase at a compound annual growth rate of 4 to 6% and 3%, respectively, through 2026. Beyond 2026, Enbridge’s EPS and DCF per share are forecasted to grow at a CAGR of approximately 5%.
Investors should note that Enbridge’s dividend growth is closely tied to its DCF per share. Thus, management’s long-term outlook suggests that Enbridge could continue to increase its dividend at a mid-single-digit rate in the future.
Bottom line
Enbridge’s diversified income streams, high utilization of its assets, power purchase agreements, cost-of-service tolling arrangements, and strong secured backlog of multi-billion-dollar growth projects position it well to grow its DCF per share and future dividend. Further, the company’s strategic acquisitions and continued investments in expanding its conventional and renewable energy assets are positives and position it well to capitalize on long-term energy demand.
Based on the company’s strong fundamentals, management is reiterating its positive visibility over future earnings and comfortably extending its 29-year streak of annual dividend increases. So investors can look forward to its impressive dividend distribution, sustainable payouts, and growth history to continue. Considering that this positive outlook does not include the gas acquisitions closing this year, Enbridge is a no-brainer dividend stock.
