Dividend stocks are an excellent choice for long-term investors, offering the potential for both capital appreciation and a steady stream of income. Reinvesting those dividends can further boost long-term returns through compounding. However, dividends are not guaranteed. Therefore, investors should focus on investing in well-established companies with resilient business models, reliable cash flows, and a long track record of consistent dividend payments.
Let’s examine Enbridge (TSX: ENB) by analyzing its business outlook, growth prospects, dividend history, and valuation to understand why it can weather market volatility and continue delivering reliable income to shareholders.
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Enbridge’s business outlook
Enbridge owns and operates one of North America’s largest and most diversified energy infrastructure networks, including crude oil and natural gas pipelines, regulated natural gas utilities, and renewable power assets. With more than 200 revenue-generating assets, a predominantly regulated business model, and largely inflation-indexed earnings, the company delivers stable, predictable financial performance across market cycles.
Backed by this resilient business model, Enbridge has met or exceeded its financial guidance for 19 consecutive years, underscoring its ability to deliver reliable long-term shareholder returns. Over the past two decades, the company has generated a total return of approximately 1,040%, representing an annualized return of 12.9%. It has also paid dividends for more than 70 years and increased its dividend for 31 consecutive years. Today, the stock offers an attractive forward dividend yield of 5%.
Enbridge’s financial position remains equally robust. At the end of the first quarter, the company had $12.7 billion in available liquidity and a rolling 12-month debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of 5. This healthy balance sheet provides the flexibility to fund its long-term growth initiatives while supporting continued dividend growth and attractive shareholder returns.
Enbridge’s growth prospects
Growing oil and natural gas production across North America continues to drive demand for Enbridge’s energy infrastructure and services. To capitalize on this favourable backdrop, the company has identified approximately $50 billion in growth opportunities through 2030. It plans to invest $10 billion to $11 billion annually to expand its pipeline network, grow its utility business, and strengthen its renewable energy portfolio.
These investments could drive meaningful long-term growth. Management projects its utility asset base will expand at an annualized rate of 8% through 2029, while its renewable energy portfolio could add 1.5 gigawatts of generating capacity. As a result, Enbridge expects adjusted earnings per share and distributable cash flow per share to increase at an annualized rate of around 5% through the end of the decade.
Supported by these growth initiatives and its resilient cash flow profile, Enbridge also expects to return $40 billion to $45 billion to shareholders over the next five years, reinforcing the sustainability of its dividend and making the stock an attractive long-term investment for income-focused investors.
Investors’ takeaway
Enbridge has delivered an impressive performance over the past 12 months, with its share price climbing more than 35%. This strong rally has pushed its valuation higher, with the stock currently trading at an NTM (next 12 months) price-to-sales multiple of 2.9 and an NTM price-to-earnings multiple of 26.7.
While these valuation metrics suggest the stock is not inexpensive, Enbridge’s resilient, regulated business model, stable cash flow generation, attractive long-term growth prospects, and above-average dividend yield justify a premium for investors. In addition, its earnings are largely insulated from commodity price volatility and economic cycles, positioning the company to perform well across a range of macroeconomic environments. Given these strengths and its long history of rewarding shareholders, I believe Enbridge remains an excellent long-term investment despite its elevated valuation.
