Dividend stocks play a vital role in a well-balanced portfolio, offering a steady income stream, lower volatility, and potential inflation hedging. These companies typically operate well-established businesses that generate stable, predictable cash flows, enabling them to return a portion of their earnings to shareholders through dividends. Their consistency and resilience also make them less sensitive to market fluctuations, helping deliver dependable long-term returns.
Against this backdrop, Enbridge (TSX:ENB) stands out as an attractive option. The company has increased its dividend for 31 consecutive years and currently offers a compelling yield of around 5.5%. With this in mind, let’s take a closer look at Enbridge’s business outlook, growth prospects, and valuation to assess its investment potential.
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Enbridge’s business outlook
Enbridge operates an extensive pipeline network that transports oil and natural gas across North America under a tolling framework and long-term take-or-pay contracts, providing strong earnings visibility. In addition, it owns three low-risk natural gas utility assets in the United States and a growing renewable energy portfolio with a total installed capacity of 7.2 gigawatts. Most of the power generated from these assets is sold under long-term power purchase agreements (PPAs), further enhancing revenue stability.
With about 98% of its earnings backed by regulated assets and long-term contracts – and nearly 80% indexed to inflation – Enbridge’s financials remain resilient to commodity price swings and market volatility. This dependable business model has enabled the company to meet or surpass its financial guidance for the past 20 years. Supported by this reliable financial performance, it has delivered total shareholder returns of roughly 950% over the last 20 years, representing an annualized return of 12.5%.
Operationally, Enbridge continues to expand. The company placed $5 billion of organic growth projects into service last year and has sanctioned an additional $14 billion in projects. It reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $20 billion, up 7% year over year, while adjusted earnings per share rose 7.9% to $3.02. Acquisitions, colder weather, favourable rate revisions, and increased customer demand drove growth.
With this strong foundation in place, let’s now examine Enbridge’s growth outlook.
Enbridge’s growth prospects
Despite the global shift toward cleaner energy, oil and natural gas could remain key components of the energy mix for years to come. Besides, rising production and consumption of oil and natural gas across North America should continue to support demand for Enbridge’s infrastructure and services.
The company has also identified a robust $50 billion growth pipeline and plans to invest $10–$11 billion annually to advance these opportunities. Backed by these expansion initiatives, management expects adjusted EBITDA and discounted cash flow per share to grow at a mid-single-digit pace in the coming years.
Enbridge’s financial position remains solid, with a debt-to-EBITDA ratio of 4.8 and available liquidity of $10.8 billion. Given its strong growth outlook and healthy balance sheet, the company appears well-positioned to continue increasing its dividend over the long term.
Investors’ takeaway
Over the past 12 months, Enbridge has delivered a strong return of 20.7%, reflecting improved investor sentiment and solid underlying performance. Following this rally, its next-12-month valuation multiples have expanded, with the price-to-sales ratio reaching 2.5 and the price-to-earnings ratio climbing to 23.8.
Despite this valuation uptick, Enbridge still appears attractively positioned, supported by its steady growth outlook, resilient business model, and above-average dividend yield.
