Why Opting for This High-Reward Dividend Share Could Be Your Preferred Option for a Long-Term Income Source
In the realm of dividend-paying companies, Enbridge (ENB -0.48%) stands out as a top choice for income investors. Sporting a dividend yield over 6%, this Canadian pipeline and utility company justifies its high position on anyone's income portfolio list. The CEO, Greg Ebel, couldn't be more certain, as he declared during the fourth-quarter analyst conference, "Our steadily growing dividend supported by a utility-like cash flow profile, remains a cornerstone of our investment offering."
Enbridge's financial stability and predictability are the backbone of its dividend strength. Around 98% of its earnings stem from cost-of-service or contracted assets. These assets secure steady cash flow, meaning the company gets paid regardless of whether the customer utilizes the contracted capacity or pays a fixed fee for the volume flowing through the system. As a result, Enbridge enjoys a high degree of cash-flow visibility. You could say the company’s earnings are more stable than a rock during a storm, averaging an impressive 19 consecutive years of hitting financial guidance targets, even in the face of significant market challenges like the financial crisis, the global pandemic, rising inflation, and an oil market price war.
To bolster its cash-flow stability, Enbridge has strategically diversified its earnings base over the years. Investments in its growing utility franchise, renewable energy platform, and gas pipeline operations have expanded the company's stable income sources. In fact, last year, Enbridge doubled its stable utility franchise size by acquiring three U.S. gas utilities, becoming the largest operator of stable gas utilities in North America. The company's diversified earnings base and low-risk cash-flow profile create a solid foundation for its high-yielding dividend payouts. Enbridge aims to distribute 60% to 70% of its stable cash flow to shareholders as dividends each year, ensuring it retains billions of dollars in excess free cash flow for future growth opportunities.
Speaking of growth, the future looks bright for Enbridge. The company's robust expansion project pipeline, including projects spread across its four core franchises (liquids pipelines, gas transmission, gas distribution & storage, and renewables), will fuel 3% to 5% annual cash-flow-per-share growth in the coming years. Enbridge's $26 billion capital project backlog is set to come online through 2029, featuring projects in various segments and locations. With its conservative payout ratio and robust growth outlook, Enbridge's dividend increase potential is off the charts.
In the CEO's words, Enbridge is a "first-choice investment opportunity," offering investors an appealing yield and long-term growth potential that's relatively resilient to economic fluctuations. The company's stable cash flow and growth ambitions have demonstrated the endurance of its high-yielding dividend over the years. With a solid financial standing, a transparent low-risk cash-flow profile, and promising growth opportunities through to the end of the decade, Enbridge should continue increasing its high-yielding dividend distribution, serving as an excellent choice for income seekers aiming for a lucrative, growing passive income stream.
- To further bolster its financial stability, Enbridge has agreed to diversify its earnings base by investing in various sectors, such as its growing utility franchise and renewable energy platform.
- The company's strategic diversification has enabled Enbridge to double its stable utility franchise size last year through acquisitions, securing even more reliable sources of income.
- Investors looking for high dividend yields can consider Enbridge, as the company aims to distribute 60% to 70% of its stable cash flow as dividends each year, while retaining excess free cash flow for future growth opportunities.
- As the CEO mentioned, Enbridge's high degree of cash-flow visibility, stable earnings, and diversified income sources make it an attractive investment option for those seeking income growth and dividends, even during market volatility.
