Sometimes a boring company that consistently pays out its growing free cash flow is something to get excited about. That’s especially true when there’s a clear path to continued dividend increases.
One such company offering an exceptional dividend is Enbridge (NYSE: ENB). The Canadian pipeline company just announced another raise for shareholders in 2024, bringing it to 29 straight years of dividend increases. The payout increased just over 3% and now yields about 7.7%.
There’s a lot to like about the stock at today’s price. And investors should expect even more dividend increases for years to come.
An income stream that can easily beat inflation
One of the most attractive factors for Enbridge is that 80% of its earnings are protected against inflation. That means its annual dividend increases should have no problem keeping up with the cost of living.
Most of the company’s assets are highly regulated. So, while that can put a cap on what Enbridge can charge customers, it also provides predictable inflation-protected rate increases. Indeed, management has put a major focus in acquiring more “utility-like” assets over the last few years, and it’s making a big increase in actual utilities with the acquisition of three properties from Dominion.
As a result, management expects steady improvements in earnings and cash flow in 2024 across all four of its major segments.
Segment
EBITDA Growth Guidance
Liquids pipeline
$300 million
Gas transmission & midstream
$400 million
Gas distribution & storage
$150 million
Renewable power
$100 million
Data source: Enbridge. EBITDA = earnings before interest, taxes, depreciation, and amortization.
On top of rate increases, growth will be driven by several factors: higher utilization for its pipelines; and its 2023 acquisitions of Morrow Renewables, Aitken Creek, and Tres Palacios for its gas transmission business and the benefits of scale that come with it. And several projects and acquisitions in its burgeoning renewables business will boost profits next year.
