Photo credit: www.fool.com
Enbridge (ENB -3.83%) is recognized for its stable business model. The company operates a network of pipelines and utility assets that provide reliable cash flow. This stability is supported by long-term contracts and regulated cost-of-service structures.
Remarkably, Enbridge has met its annual financial guidance for 19 consecutive years, showcasing its resilience through various challenges, including economic downturns, fluctuating commodity prices, environmental disasters, a global pandemic, and persistent inflationary pressures.
In the last fiscal year, Enbridge reported robust performance, strategically acquiring several prominent U.S. natural gas utilities. This move positions the company for sustained growth in earnings and cash flow, ensuring that its shareholders benefit from a solid dividend yielding 6%.
A Historic Milestone
In a recent earnings report, CEO Greg Ebel highlighted 2024 as “a historic year for Enbridge.” The company achieved a 13% increase in EBITDA (earnings before interest, taxes, depreciation, and amortization), totaling $13.3 billion, while its distributable cash flow (DCF) grew by 6% to reach $8.5 billion. A significant contributor to this growth was the completion of a “once in a generation” acquisition involving three major U.S. gas distribution firms for CA$19 billion ($13.4 billion), which Ebel described as a strategic enhancement to Enbridge’s low-risk business model. This acquisition positions Enbridge as the largest owner of natural gas utilities in North America, aligning with the rising demand for natural gas in the region.
Additionally, the company implemented $3.5 billion in organic expansion projects last year across its four primary sectors: liquids pipelines, gas transmission, gas distribution, and renewable energy. Enbridge also executed three smaller acquisitions to bolster its presence in the Permian Basin’s natural gas market and enhance the Enbridge Ingleside Energy Center, a key crude oil export facility.
Growth Potential
With substantial investments made last year, Enbridge is poised for growth as it moves into 2025. The company projects adjusted EBITDA to rise between $13.7 billion and $14.2 billion, representing an increase of 8% to 11% from the previous year. The projected DCF per share growth is estimated at up to 5.4%, although it may be influenced by recent tax legislation changes and some share dilution connected to the utility acquisitions.
Looking ahead, this positive trend is expected to continue well into 2026 and beyond. Enbridge has approved $5.7 billion for new organic expansion initiatives, which are key to its long-term strategy. Among the noteworthy projects are:
Tennessee Ridgeline: A $1.1 billion expansion of the Tennessee Natural Gas system is set to provide supply to a new gas power plant expected to be operational next year.
Gulf of Mexico: Enbridge has strategic projects supporting BP’s Kaskida and the Sparta development, led by Shell and Equinor, which should be completed by 2029.
North Carolina gas distribution: The recent acquisition includes significant growth initiatives, featuring the Moriah Energy Center, a liquefied natural gas facility to enhance reliability, and the T15 Reliability Project to connect with Duke Energy’s 1.4 GW Roxboro gas-fired facility, scheduled for 2027 and 2028, respectively.
Solar: Enbridge is developing three major solar energy projects in the U.S., backed by long-term agreements with Amazon, AT&T, and Toyota, with service commencement anticipated within the next year.
These initiatives contribute significantly to a robust backlog and future growth outlook. Enbridge entered 2025 with $18.4 billion in projects under construction, projected to commence commercial operations through this decade. These endeavors are anticipated to promote annual DCF per share growth of 3% to 5% in the coming years, providing the foundation for Enbridge to continue increasing its already impressive dividend, which has seen annual increases for 30 consecutive years.
Consistent and Reliable
Enbridge’s low-risk pipeline and utility operations yield predictable earnings, allowing the company to maintain a stable cash flow for dividend distributions and ongoing investments in energy infrastructure expansion. With a solid growth trajectory ahead, Enbridge remains a compelling choice for investors seeking a reliable income stream through structured growth.
Source
www.fool.com