Enbridge (NYSE:ENB) Shell is the largest operator of energy infrastructure in North America. The Canadian pipeline and utility company transports 30% of the oil produced in North America and 20% of the gas consumed in the United States and operates the continent’s largest gas utility. In addition, it is among the world’s leading countries in renewable energy production.
These assets help Enbridge pay a well-supported dividend, which currently yields around 7%. At the same time, Enbridge has plenty of visible growth ahead, which, combined with its dividend, should fuel it to produce low double-digit annual earnings. Total Revenue In the coming years. These features make Enbridge a “first-class investment opportunity,” CEO Greg Ebel said in a second-quarter earnings statement.
built like rock
Enbridge recently reported strong second quarter results. Earnings before interest, taxes, depreciation and amortization (EBITDA) The company’s earnings rose 8% (setting a new record for the period), while cash flow per share rose 3%.
However, what was most significant was the significant progress the company made on its strategic priorities during the quarter. Enbridge closed the second of three natural gas projects Feasibility Acquisitions in the period, Questar purchase of Dominion The company also settled with a regulator, creating a clear path to close its third and final acquisition of Dominion Public Services Corporation (PSNC) in the third quarter, and has completed all necessary financing for those transactions. These utility acquisitions will further stabilize and diversify its cash flow.
Even with the pre-financing of the acquisitions, Enbridge ended the second quarter at 4.7 times earnings. Leverage Ratiowithin its target range of 4.5 to 5.0 times. The company’s credit rating agencies put their stamp of approval on its balance sheet during the quarter, reinforcing “our long-standing view that our balance sheet is strong,” Ebel said. Meanwhile, debt will gradually decline as the company takes full advantage of its utility acquisitions, giving it more financial flexibility.
With a conservative dividend payout ratio (60%-70%), Enbridge has billions of dollars in annual investment capacity. It can self-fund the equity needed for expansion using retained cash flows after dividend payments while using its ample balance sheet capacity to fund Balance Capital needs for future growth.
These factors put Enbridge’s high profits at risk very firm The foundation. They are All except Ensuring the company’s ability to maintain its clean dividend payment record. The company has paid dividends for over 69 years, with the payout level increasing annually for 29 consecutive years.
More growth in the future
Utility acquisitions will provide a boost to earnings in 2024 and beyond. Enbridge increased its full-year adjusted EBITDA outlook for 2024 while maintaining its cash flow per share outlook, as the impact of pre-financing deals offsets the additional cash flow. This increase will provide a more significant boost next year as the company gets the full impact of its growing earnings and cash flow. At the same time, they will provide growth in the coming years as Enbridge invests in expansion. that it Operations.
These facility expansions are part of Enbridge’s C$24 billion ($17.3 billion) secured commercial projects backlog. The company has recently added several more projects, boosting its long-term growth outlook. These new additions include:
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Blackcomb Pipeline: Enbridge and its partners are building a 2.5 billion cubic feet per day pipeline to increase gas transportation capacity in South Texas.
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Grey Oak Pipeline: The company is moving forward with the production of 120 thousand barrels per day. Expanding this oil pipeline.
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Orange Grove Solar: Enbridge is investing $250 million to build a 130-megawatt solar farm. AT&T I agreed to buy 100% of the energy you will produce.
Enbridge has sufficient financial capacity to fund its capital projects backlog with room to do so. As a result, it can continue to approve new projects and make additional acquisitions as opportunities arise. The company estimates that these investments will help grow cash flow per share at an annual rate of 3% to 5% in the coming years.
First class investment opportunity
Enbridge’s low-risk business model supports its dividend and expansion plans. For this reason, the company offers very strong income streams with a yield of 7%, and should be able to grow its cash flow by 3% to 5% per year (which supports a similar growth rate for earnings). Added to this, Enbridge has the potential to deliver total annual returns of 10% to 12% in the coming years. This is an excellent return for such a low-risk stock, making it stand out as a long-term investment opportunity.
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Matt Delallo The Motley Fool has positions in Enbridge and recommends Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has Disclosure Policy.
This 7% dividend stock should be your top pick for income and upside. Originally posted by The Motley Fool