This surefire 6.4% dividend stock has the fuel to keep growing
Enbridge (NYSE: ENB) is one of the most reliable dividend-paying stocks in the energy sector. Canada’s energy infrastructure juggernaut has increased payments for 27 consecutive years. Its most recent 3% increase pushed its dividend yield to 6.4%.
This upward trajectory of the dividend shows no signs of an imminent end. Enbridge has enough fuel to grow its cash flow over the next few years, which should support continued dividend increases. This makes it an excellent stock for investors looking for a sustainable passive income stream.
End 2021 in style
Enbridge recently announced strong results through the end of 2021. The business generated C$10 billion ($7.9 billion) in distributable cash flow. That was up 6% from the 2020 total and at the top of its guidance range.
The main driver was the partial benefit of C$10 billion ($7.9 billion) from expansion projects commissioned last year, led by the Line 3 Replacement Project. The company also made some profit from its $3 billion acquisition of Moda Midstream, which included the Ingleside Energy Center. These new additions to its portfolio, combined with the strong operational performance of its legacy assets, fueled its 2021 results. This more than offset the C$1.2 billion ($950 million) of assets it has sold to help finance its expansion.
Lots of power to grow in 2022 and beyond
Enbridge’s investments in 2021 provide the fuel for accelerated growth in 2022. The company sees distributable cash flow increasing by 8% in the middle of its guidance range. This is more than enough to cover the dividend increase. Halfway through, Enbridge will have a dividend distribution rate by 64% in 2022. The company will benefit from a full year of its recently completed expansion projects – Line 3 providing significant cash flow growth this year – and the acquisition of Moda. Additionally, several other expansion projects are expected to come on stream in 2022, which will provide additional cash flow.
A notable 2022 project is to install 60 megawatts of solar energy at the recently acquired Ingleside Oil Export Facility. This investment will allow this facility to generate net negative emissions. Enbridge also plans to complete one of its offshore wind energy facilities in Europe by the end of the year as well as several other natural gas infrastructure projects.
Overall, Enbridge has C$10 billion ($7.9 billion) of capital projects secured to fuel growth through 2024. These are primarily investments in natural gas infrastructure and renewable energy. This backlog is expected to support 5% to 7% annual growth in Enbridge’s cash flow per share over the next few years. This should allow Enbridge to continue to increase its dividend.
Meanwhile, Enbridge is scrambling to find new investment opportunities to extend its growth forecast. Between the excess cash he keeps after making dividend payments and balance sheet capacity, Enbridge has the financial flexibility to spend C$5 billion to C$6 billion ($3.9 billion to $4.7 billion) annually on expansion projects, acquisitions and buyouts. actions. It is increasingly focused on seizing low-carbon investment opportunities to drive long-term growth. For example, it is partnering with several other entities on a potential carbon capture and storage facility in Alberta that could sequester 4 million tonnes of carbon dioxide emissions per year. It is also making early investments in renewable natural gas and hydrogen. These early investments could lead to even greater long-term expansion opportunities that could drive growth in the future.
A sustainable passive income stream
Enbridge has an outstanding dividend history that it is unlikely to break anytime soon. The company uses cash flow generated from its legacy fossil fuel infrastructure to pay its dividend and expand into cleaner energy sources. These investments are expected to pay dividends in the years to come, giving Enbridge the fuel to continue increasing its payout. Combine that growth with Enbridge’s high dividend yield, and it’s a surefire way to generate stable passive income.
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Matthew DiLallo owns Enbridge. The Motley Fool owns and recommends Enbridge. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.