Enbridge Inc. (TSX: ENB) has been a solid outperformer in terms of both dividend yield and capital gains over the long term. But despite Enbridge’s strong Q3 results, Enbridge’s stock price is down almost 18% from its summer highs. This could be a great opportunity to load up on this energy giant.
Let’s take a look at the bull case for owning Enbridge stock today.
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Q3 results reflect bullish energy fundamentals
Enbridge’s Q3 results were released on Friday. They reflected performance that was pretty much as expected. Adjusted earnings per share (EPS) was $0.49 versus $0.46 in the same period last year. Distributable cash flow increased approximately 4% to $2.7 billion. And, most importantly, guidance was reaffirmed.
Underneath these numbers were a few key data points worth mentioning. Enbridge’s mainline continues to operate at or near capacity, highlighting the potential and the need for growth in North America’s energy infrastructure. This is obviously good for Enbridge.
In gas transmission, results were exceptionally strong. The opportunity here is growing as infrastructure that supports liquified natural gas (LNG) and power generation demand is in high demand. As per Enbridge’s management, “natural gas is one of the most attractive areas of growth across North America”.
Enbridge’s secure and growing dividend
Enbridge’s Q3 results add another data point to a long list of data points that reflect the stability and reliability of Enbridge stock’s operational and financial performance. As a result, it comes as no surprise that the dividend has a just as impressive track record.
In fact, Enbridge stock has a track record of 31 consecutive years of dividend increases. Looking ahead, this dividend is expected to grow at a compound annual growth rate of 5% in the medium term. That’s significant dividend growth, which will be supported by the growth that’s expected in Enbridge’s business and cash flows over that same time period.
Growth opportunities to take Enbridge into unprecedented territory
The buildout of the energy ecosystem is happening at an accelerating pace, and as the government continues to implement pro-energy legislation, this will continue. Of course, Enbridge has been and will continue to be busy. In fact, the company has $38 billion worth of growth projects planned in the coming years.
For example, Enbridge stock has a set of high-quality opportunities that will support LNG as well as power generation demand. In gas transmission, increasing demand is being seen throughout North America. This is opening up opportunities to expand Enbridge’s footprint and presence in regions of high growth. Finally, in liquids, supply growth out of Western Canada is strong. Therefore, infrastructure must be expanded in order to support this supply. Enbridge is ready to meet this challenge.
We are heading into a period of rapid growth in the energy sector, and Enbridge stock is a smart way to gain exposure.
The bottom line
Rapidly rising power demand, population growth, manufacturing investment, LNG, and electrification are some of what is driving this energy super-cycle. From a global perspective, North America is so important for global energy security. As demonstrated in Enbridge’s Q3 results, this is all very good for the company. Looking ahead, Enbridge’s stock price will continue to benefit from these tailwinds.
