The Bank of Canada has cut its benchmark interest rate nine times since June 2024, lowering it from a high of 5% to 2.25%. In this low-interest-rate environment, investors should look to acquire quality dividend stocks to boost their passive income. Meanwhile, dividends are not guaranteed. So, one has to be cautious and look to invest in stocks with well-established businesses, healthy cash flows, and consistent dividend growth.
Against this backdrop, I believe Enbridge (TSX:ENB) would be an ideal choice. An investment of $7,000 in the stock can generate a quarterly payout of $103.8, translating into an annualized income of over $415. Meanwhile, let’s examine its operations and growth prospects to assess the sustainability of its dividend payouts.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | INVESTMENT | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| ENB | $65.18 | 108 | $6,974 | $0.97 | $103.8 | Quarterly |
Enbridge’s historical performance
Enbridge is a diversified energy company that operates an extensive pipeline network transporting oil and natural gas across North America under a tolling framework and long-term take-or-pay contracts. In addition, the company operates 3 natural gas utilities serving approximately 3 million customers in the United States and owns 41 renewable energy assets with a combined power generation capacity of 7.2 gigawatts. These renewable assets are supported by long-term power purchase agreements, which help insulate their financial performance from market volatility.
Overall, Enbridge generates about 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets or long-term take-or-pay contracts. As a result, the company has minimal exposure to commodity price fluctuations, while roughly 80% of its adjusted EBITDA is inflation-indexed, providing a natural hedge against rising prices. Despite several macro challenges, the company has consistently grown its adjusted EBITDA at an annualized rate of 8% over the last 10 years.
This stable cash flow profile has enabled Enbridge to pay dividends consistently. It has rewarded its shareholders by paying dividends for more than 70 years and has also increased its dividend for 31 consecutive years. At present, the company pays a quarterly dividend of $0.97 per share, yielding approximately 6% based on the January 20th closing price.
With this strong income foundation in place, let’s now turn to Enbridge’s growth prospects.
Enbridge’s growth prospects
Rising oil and natural gas production across North America is driving increased demand for midstream services, expanding Enbridge’s addressable market. Against this backdrop, the company has identified approximately $50 billion in growth opportunities over the next five years across its four business segments. Enbridge is also advancing $37 billion in secured growth projects, supported by annual capital investments of around $10 billion. Management expects to place approximately $5 billion of projects into service in 2025, followed by about $8 billion in 2026.
As these investments come online, Enbridge’s management projects adjusted EBITDA in 2026 to range between $20.2 billion and $20.8 billion, while the discounted cash flow per share (DCF/share) could fall between $5.70 and $6.10. At the midpoint, these projections imply year-over-year growth of 4.1% in adjusted EBITDA and 3.5% in DCF per share. Beyond 2026, management expects adjusted EBITDA and DCF per share to grow at approximately 5% annually.
Given its stable cash flow profile and a visible growth pipeline, Enbridge appears well-positioned to sustain dividend growth in the years ahead.
Investors’ takeaway
In addition to rewarding shareholders with consistent dividend growth and an attractive yield, Enbridge has also delivered solid returns through share price appreciation. Over the past decade, the company’s stock price has risen by more than 58%, translating into an annualized gain of approximately 4.7%. Supported by its visible growth pipeline and solid underlying businesses, the company appears well-positioned to continue generating steady share-price appreciation.
Moreover, Enbridge’s valuation remains reasonable, with next-12-month (NTM) price-to-sales and price-to-earnings multiples of 2.9 and 22, respectively. Taken together, these factors make Enbridge an excellent choice for investors looking to enhance passive income while benefiting from long-term capital appreciation.
