8 Apr

Enbridge: Why Income Investors Are Attracted to the Stock

WRITTEN BY Rekha Khandelwal, CFA

Enbridge’s dividends

Income investors looking for regular and stable dividend income might be attracted to Enbridge (ENB) stock. The company has paid dividends for more than 64 years. Enbridge has increased its dividends for 24 consecutive years. The company’s dividends grew at a compound annual growth rate of 11% over 24 years. Currently, the stock yields ~6.0%.

Enbridge: Why Income Investors Are Attracted to the Stock

Dividend growth outlook

Enbridge expects compound annual dividend growth of 10% from 2018 to 2020. The company targets to pay less than 65% of its DCF (distributable cash flow) in dividends. Enbridge aims to retain the remaining cash for investments in growth projects. The investments should generate sustainable cash flow growth. The company expects a DCF growth rate of 5%–7% beyond 2020.

Attractive yield

Enbridge’s yield of ~6.0% is higher compared to its peers. TransCanada (TRP) yields ~5.0%. Kinder Morgan (KMI), Williams Companies (WMB), and ONEOK (OKE) are trading at yields of 4.0%, 5.3%, and 4.9%, respectively.

Enbridge transports ~25% of North America’s crude oil and 18% of North America’s natural gas. The company owns the world’s longest crude oil and liquids transportation system. Around 65% of the Canadian crude oil exports to the US are transported on Enbridge’s system. Liquids pipelines, gas transmission, and gas utilities are Enbridge’s three core businesses.

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