Enbridge has established a reputation for reliability in its sector. Despite inherent uncertainties in investing, Enbridge, a Canadian pipeline and utility firm, has consistently proven to be a stable investment over the decades. The company has distributed dividends for more than 69 years, with increases recorded for the past 29 consecutive years. Enbridge is also set to meet its financial guidance for the 19th consecutive year. With a yield of 6.5%, Enbridge is considered an attractive option for those seeking dependable income and growth.
Enbridge’s reliable growth trajectory continues as evidenced by its recent third-quarter financial results. The energy infrastructure company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CAD $4.2 billion (USD $3 billion) for the period, reflecting an 8% increase from the previous year. This growth was driven by strong utilization across existing assets, recent expansion projects, and acquisitions. Notably, the acquisition of three natural gas utilities has bolstered its capacity for sustainable growth. According to CEO Greg Ebel, these assets align well with Enbridge’s low-risk business model, providing dependable cash flow and quick-cycle growth prospects.
The company’s robust performance in the third quarter has positioned it to achieve full-year guidance for the 19th year in a row. The CEO also indicated expectations to be at the higher end of Enbridge’s 2024 EBITDA range and close to the midpoint of its original distributable cash flow per-share guidance range.
Enbridge’s recent acquisitions in the gas utility sector are set to enhance the stability of its earnings profile. With 98% of its cash flows coming from predictable cost-of-service and contracted assets, Enbridge has limited exposure to commodity price fluctuations and volume impacts, offering significant visibility into its cash flows. The company allocates 60% to 70% of its stable cash flow to dividends, maintaining a cushion for reinvestment into growth. Enbridge also maintains a strong investment-grade balance sheet with a leverage ratio at the lower end of its 4.5-to-5.0 target range.
The firm has an estimated annual investment capacity of CAD $8 billion to $9 billion (USD $5.7 billion to $6.5 billion) based on excess free cash and available balance sheet resources. Enbridge has approximately CAD $27 billion (USD $19.4 billion) in commercial secured capital projects set to come online by 2029, with plans to invest around CAD $6 billion to $7 billion (USD $4.3 billion to $5 billion) annually on these projects. This allows Enbridge flexibility for further expansion projects, acquisitions, and balance sheet strengthening.
Enbridge projects EBITDA growth at an annual rate of 7% to 9% through 2026, with a subsequent rate of about 5% annually. Correspondingly, cash flow-per-share growth is expected to be approximately 3% annually through 2026, increasing to about 5% per year thereafter. This anticipated growth in earnings supports Enbridge’s ability to continue increasing its dividend.
Enbridge offers a steady return with its reliable and high-yielding dividend, which is likely to grow in tandem with its cash flow, positioning investors for potential double-digit annual returns from this dependable investment.
