Enbridge (ENB 0.05%) recently reached a new milestone for dividend growth. The Canadian pipeline and utility operator has now increased its payment for 30 straight years after boosting its payout by 3% for 2025. That raise will push its dividend yield even closer to 6%.
Here's a look at what has fueled its ability to grow its dividend over the years and whether it has the power to continue pushing its payout higher in the future.
Built for durability
With three decades of dividend growth, Enbridge has one of the longest streaks in the North American energy sector. That's a testament to its ability to weather the sector's volatility.
A few factors have contributed to Enbridge's durability over the decades. A big one is its business model. It operates predictable pipelines and utilities backed by government-regulated rate structures and long-term, fixed-rate contracts. The company's low-risk cash flow profile has been on full display over the past two decades. It's on track to achieve its annual financial guidance for the 19th year in a row despite two major recessions and two additional periods of oil market turbulence.
Enbridge has worked to enhance the overall stability of its cash flow over the years by shedding assets with exposure to commodity prices and replacing them with those that produce steadier cash flow. For example, it sold its interest in Aux Sable, a natural gas liquids extraction and fractionation business with commodity price exposure. It recycled that capital into three rate-regulated natural gas utilities it has acquired this year.
Enbridge has also maintained a fortress-like financial profile. The company has a reasonable dividend payout ratio of 60%-70% of its stable cash flow. That allows it to retain billions of dollars each year to invest in expanding its operations. The company also has a strong investment-grade balance sheet with a low leverage ratio that should be in the middle of its 4.5-to-5.0 target range next year, giving it additional financial flexibility.
Built-in growth
Enbridge has maintained a strong financial profile while investing heavily over the years to expand its operations. The company has grown from its initial focus on operating oil pipelines to a much more diversified energy infrastructure company. It has made several notable acquisitions, including buying gas pipeline operator Spectra Energy in 2017 and purchasing three U.S. gas utilities last year. It has also invested billions of dollars into organic expansion projects across all four of its core franchises: liquids pipelines, gas transmission, gas distribution and storage, and renewable power.
The company currently has $27 billion Canadian (US$19.2 billion) of secured capital projects in its backlog. These projects span each of its four core franchises and should come online through 2029.
That backlog provides Enbridge with lots of visibility into its future growth. It currently expects to grow its cash flow per share at a 3% annual rate through 2026. Meanwhile, it expects its growth rate to accelerate to around 5% annually after that. In addition to the growth from its secured capital projects, Enbridge has ample additional annual investment capacity to secure new capital projects and make bolt-on acquisitions.
That growth should support continued dividend increases. Given Enbridge's strong financial profile, it should be able to support dividend growth in line with its cash flow growth or by about 3% to 5% annually.
An elite dividend stock
Enbridge has continued its elite record of increasing its dividend. The pipeline and utility giant's high-yielding payout is on a very sustainable foundation thanks to its very low-risk business model and strong financial profile. It has ample financial flexibility after paying its growing dividend to expand its operations, and enough fuel in its backlog to grow through at least the end of the decade. It's an excellent dividend stock to buy and hold for a growing stream of income.
