In This Article:
Key Points
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Enbridge's dividend checks off all the boxes for income investors.
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Its business is stable and relatively low risk.
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The energy company is also poised to deliver solid growth the rest of this decade.
Mick Jagger and the Rolling Stones were right when they sang "You Can't Always Get What You Want." In many cases, we have to be willing to settle for less than what we'd prefer. That's certainly often true with investing.
However, sometimes you can get everything you want -- or at least come close to doing so. If you're an income investor, I think Enbridge (NYSE: ENB) just might give you almost everything you could want in a dividend stock.
A dividend that checks off all the boxes
Let's start with Enbridge's dividend program. I believe it checks off all the boxes for income investors.
First, the pipeline and energy company pays a forward dividend yield of 6.09%. Such an ultrahigh yield isn't unusual for Enbridge. Its dividend yield has topped 6% throughout most of the last four years.
Second, Enbridge has increased its dividend for 30 consecutive years. Only a handful of energy stocks can boast a longer streak of dividend hikes.
Those two points wouldn't mean much if Enbridge's dividend were in jeopardy of being cut. But that isn't the case at all. The company's distributable cash flow payout ratio is between 60% and 70%. This reflects ample financial flexibility to keep the dividends flowing and growing.
A stable, low-risk business
The key to Enbridge's stellar dividend track record is the company's stable, low-risk business. Enbridge is mainly known for its pipelines. It operates over 18,000 miles of crude oil pipeline, delivering roughly 30% of the crude oil produced in North America. Add to that roughly 72,500 miles of natural gas and natural gas liquids pipelines that transport around 20% of the natural gas consumed in the United States.
But the company's business extends beyond pipelines. Enbridge ranks as the largest natural gas utility in North America based on volume. Its renewable energy projects in operation or under construction have a total capacity of over 6.6 gigawatts, enough to supply electricity for 1.3 million homes.
Enbridge generates cash flow from more than 200 asset streams and businesses. Over 98% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) is protected by regulatory agreements or take-or-pay frameworks. Over 80% of its EBITDA is protected from inflation through built-in escalators or regulatory paths to seek higher prices. Less than 1% of EBITDA is linked to commodity prices.