Enbridge generates very durable cash flow to support its high-yielding dividend.
The company has a conservative financial profile, giving it ample capacity to invest in expanding its business.
It has a vast backlog of secured expansion projects and plenty of additional growth opportunities ahead.
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Enbridge (NYSE: ENB) has been a stellar dividend stock over the decades. The Canadian pipeline and utility company has made dividend payments for more than 70 years and has increased its payout annually for the past three decades.
The energy company should have plenty of fuel to continue increasing its dividend, currently yielding 5.8%. That’s why I recently bought more shares of this amazing income grower, which I expect to continue doing next year.
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Enbridge’s diversified energy infrastructure platform produces very durable and predictable cash flows. Approximately 98% of the earnings generated by its pipeline and utility assets come from stable cost-of-service arrangements or long-term, fee-based contracts. Its low-risk business model produces such predictable cash flows that Enbridge has achieved its annual financial guidance in each of the last 19 years. That occurred despite significant market volatility during the period (two major recessions and multiple periods of energy market turbulence).
The company pays out a conservative percentage of its stable cash flow in dividends (60% to 70% annually). That gives it a comfortable cushion while allowing it to retain over 4 billion Canadian dollars ($2.9 billion) in free cash flow after paying dividends each year to fund growth capital projects.
Enbridge also has a strong investment-grade balance sheet. Its leverage ratio has been steadily falling and was at 4.7 times at the end of the second quarter as it trends toward the lower end of its 4.5 times to 5.0 times target range. That low-leverage level gives it an additional CA$5 billion ($3.6 billion) of annual investment capacity to fund expansion projects and…
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