Enbridge (ENB) has turned the mundane into an investor’s delight, consistently delivering growing free cash flow alongside a clear trajectory for ongoing dividend increases. Enbridge Inc., with its headquarters located in Calgary, Canada, boasts a robust workforce exceeding 12,000 individuals, primarily distributed across the United States and Canada. As a publicly traded company, Enbridge (ENB) is listed on both the New York and Toronto stock exchanges. The company’s notable achievements include being recognized in the Thomson Reuters Top 100 Global Energy Leaders in 2018, a consistent presence on Bloomberg’s Gender Equality Index for five consecutive years, with the most recent inclusion in 2023. Moreover, Enbridge has earned a position among Canada’s Top 100 Employers a notable 20 times, with the latest acknowledgment occurring in 2023. These accolades underscore Enbridge’s commitment to excellence, diversity, and being a top-tier employer in the Canadian landscape.
The Canadian pipeline giant recently announced its 29th consecutive annual dividend hike, boasting a 3% increase, now yielding approximately 7.7%. What sets Enbridge apart is its robust protection against inflation, with 80% of earnings shielded. This inflation resilience positions the company to comfortably sustain its annual dividend growth, aligning with Enbridge’s strategic shift towards more regulated and utility-like assets. The recent acquisition of Dominion’s properties further solidifies its position, enhancing the predictability of inflation-protected rate increases.
Enbridge’s diversified portfolio, including acquisitions in renewables and gas transmission, fuels its growth outlook for 2024. Despite anticipated headwinds from higher interest expenses due to a planned debt refinancing, Enbridge’s inflation-protected assets are well-equipped to absorb the impact. With its dividend payout aligning within management’s target range of 60-70% of distributable cash flow (DCF), Enbridge is poised for steady growth in DCF, translating into reliable annual dividend increments.
For the mid-term, Enbridge aims to augment its DCF by approximately 3% annually, complemented by a projected 5% EBITDA growth post-2025. This supports the company’s commitment to delivering annual dividend increases in the low to mid single digits, making its current 7.7% yield an enticing prospect for investors. Enbridge’s stock, currently trading at an enterprise value (EV) of just 11 times the 2024 EBITDA guidance, presents a compelling opportunity, especially considering its historical EV/EBITDA multiple of around 14.
In essence, Enbridge not only offers income investors an attractive dividend with a strong likelihood of sustained growth but also positions its stock as a sound investment, combining a robust yield with the potential for capital appreciation. As Enbridge continues its trajectory of steady and reliable performance, it stands as a valuable addition to any dividend-focused portfolio.
