When it comes to dividend investing in Canada, I find it difficult to ignore Enbridge (TSX: ENB). It’s one of those stocks that often comes up whenever someone asks me how to generate regular income without constantly buying and selling investments.
And there are several reasons for that. The company operates essential energy infrastructure and offers a dividend yield that looks especially appealing when you’re thinking about replacing part of your paycheque in retirement.
But here’s what I’d ask before buying it today: can Enbridge keep paying that dividend while also managing its debt and spending billions on new projects? That’s a big question I’d look at closely before deciding whether the stock belongs in a retirement income portfolio.
Let’s take a closer look at whether Enbridge stock remains an attractive retirement income choice and whether its strengths outweigh the financial risks.
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Enbridge stock
In short, this Calgary-based energy infrastructure giant operates an extensive network of oil and natural gas pipelines, gas distribution systems, and renewable power assets. ENB stock hasn’t seen any notable change over the last year, and currently trades at $68.01 per share with a market cap of $151.6 billion.
More importantly for retirees, Enbridge offers an attractive 5.7% annualized dividend yield. With its quarterly dividend of $0.97 per share, investors could earn $3.88 per share in annual passive income. And its latest financial results suggest that the company’s underlying business remains resilient despite some earnings pressure.
Why its share price doesn’t show real strength
Enbridge stock hasn’t seen much appreciation over the last year, but its financial growth trends still look strong, making it even more attractive to buy at current levels.
In the second quarter, Enbridge’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed nearly 3% year-over-year (YoY) to $4.8 billion. This improvement was mainly driven by higher revenues from its natural gas transmission and distribution businesses following regulatory rate increases.
More importantly, the Canadian energy giant’s quarterly operating cash flow jumped 27% YoY. Its distributable cash flow (DCF), an important measure of its ability to support dividends, also increased by nearly 2% YoY due mainly to higher operating earnings and lower maintenance spending.
Enbridge’s long-term growth potential
Besides offering attractive passive income, Enbridge’s ongoing expansion efforts make it an even more appealing stock for retirees seeking long-term stability and growth.
In July, the company reported a massive $41 billion secured growth project backlog, reflecting its continued investments in oil and natural gas infrastructure and renewable energy projects. These investments could help Enbridge generate higher cash flows in the coming years.
Meanwhile, Enbridge is also strengthening its North American energy infrastructure network through acquisitions. In August, it announced a US$600 million deal to acquire Salt Creek Midstream’s crude oil gathering business, which could improve its connectivity between Permian Basin production and major export markets.
In September, Enbridge announced another US$2.6 billion acquisition involving Tallgrass Energy’s crude transportation assets. Both proposed acquisitions are expected to boost DCF per share, although they were subject to closing conditions when announced.
On top of that, Enbridge’s planned $2.7 billion joint venture with KKR and Apollo to fund Westcoast pipeline expansions could support its growth ambitions while maintaining financial flexibility.
Is Enbridge Stock still a buy for retirement passive income?
Notably, Enbridge expects its DCF per share to grow by approximately 5% annually over the medium term. While its debt-to-EBITDA ratio of 5.1 remains slightly above its targeted range, growing cash flows and disciplined financing could strengthen its long-term dividend outlook.
Overall, I believe Enbridge remains an attractive Canadian dividend stock for retirees. Its generous yield, essential infrastructure assets, and promising expansion plans could help investors earn dependable passive income while benefiting from gradual long-term growth.
