Investing in Enbridge stock can be a good choice if you are looking to invest in the energy industry. The company has pipelines transporting natural gas, crude oil, and natural gas liquids. The channels are located in Canada and the United States. The company is headquartered in Calgary, Alberta, Canada.
The dividend growth rate over the last 27 years
Despite the bear market, Enbridge (TSX: ENB) has managed to raise its dividend every year of the last decade. Moreover, for 27 years, the company has increased its dividend by 10.7%. This is a solid dividend growth rate.
Enbridge is an energy infrastructure giant with a focus on operating utilities. Its contracts with long-term customers and government-regulated rate structures generate stable cash flow. It is also investing in lower-carbon energy sources. In addition, it has an investment-grade credit rating, which puts its dividend on a solid footing.
In 2022, the company projects that its DCF per share will increase at an average rate of 5% to 7%. It expects to achieve adjusted EBITDA from C$15 to C$15.6 billion. The company also plans to repurchase C$1.5 billion of its shares. As a result, its debt-to-EBITDA ratio is expected to be in the range of 4.5 to 5.0. This will not impact its ability to raise its dividend soon. However, in the long run, interest rates could affect its ability to increase dividends.
In addition, Enbridge will likely need to borrow more to complete work on Line 3 of the pipeline. This will increase the diameter of the pipe by two inches, adding revenue to the company.
The dividend payout ratio is high.
Despite being an investment-grade company with an extremely high dividend payout ratio, Enbridge stock is still a solid income option. This Canadian energy infrastructure company has been raising dividends for over two decades. Its payout ratio is just under 100%.
In addition, Enbridge has a solid financial profile and has maintained a BBB+ credit rating. It has $60 billion in equity and $67 billion in long-term debt. The company is highly diversified, and its business mix does not depend on a single supply basin. As a result, it can use funds to acquire other companies, expand its operations, or pay off its long-term debt.
It has paid a dividend every year since 1953 and has increased its dividend payouts in the last 26 years. The premium has grown at a compound annual rate of ten percent. Currently, Enbridge pays a quarterly dividend of CA$0.86.
The dividend is also safe and secure, thanks to Enbridge’s stable cash flow. Moreover, it is expected to grow at a five to seven percent CAGR over the next five years. This growth is fueled by Enbridge’s ability to continue expanding its pipeline footprint.
In addition, the company has a low-risk business model and a diversified portfolio of businesses. While some of these businesses do not directly affect cash flow, they can be accretive in the future.
The price/earnings-to-growth ratio is within the target ranges.
Increasing energy demand and global shortages of fossil fuels have highlighted the need for a new and reliable energy supply. This is being met by Enbridge, which operates a network of pipelines and storage facilities in North America. These assets generate revenue from long-term contracts and a diversified portfolio of operating utilities.
The company has improved its balance sheet and recently announced several expansions to its backlog. These include US$0.4 billion in the extension of the Texas Eastern System and an estimated $1.2 billion in the T-North addition of the BC Pipeline System. These projects will add capacity to the pipelines that move natural gas in the U.S. and Canada.
This year, Enbridge also increased its dividend payout by 3.2%. This is in line with its dividend growth history, which dates back to 1953. The company has also taken several steps to reduce its risk. For example, it has sold off non-core assets and decreased its stake in DCP Midstream.
It also signed a contract to invest in a Woodfibre LNG facility in Squamish, British Columbia. This investment will help improve the company’s balance sheet and it is poised to deliver better total returns than its two largest competitors.
It is also the largest midstream company in North America. The company moves around 20% of the natural gas consumed in the U.S. and transports barrels of crude oil daily. It also offers an attractive dividend yield of 6.6%.