This Nearly 6%-Yielding Dividend Stock's Visible Growth Makes It a Top-Tier Investment Opportunity

Globe and Mail

06-08-2025

Key Points
Enbridge recently reported strong second-quarter results.
The company is on track to deliver growth at the high end of its annual guidance range.
It continues to secure new growth opportunities.
10 stocks we like better than Enbridge ›
A high dividend yield can sometimes indicate that a company's growth days are in the rearview mirror. These companies often lack attractive opportunities to reinvest their cash flow. As a result, they pay out the bulk of it in dividends.
However, that's not the case with Enbridge (NYSE: ENB). While the Canadian pipeline and utility giant currently has a dividend yield approaching 6%, it also has an abundance of growth opportunities. This positions it to deliver attractive total returns for investors, making it, in the words of CEO Greg Ebel, "a first-choice investment opportunity."
High-end growth in 2025
Enbridge recently reported its second-quarter financial results. The energy infrastructure giant generated 4.6 billion Canadian dollars ($3.3 billion) of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) during the period. That was 7% higher compared to the year-ago period. Fueling that growth were the acquisitions of three U.S. gas utilities, higher rates on some of its systems, growing customer demand, and the contributions from several recently completed expansion projects.
The company's strong first-half performance supports its expectation of achieving its full-year financial guidance. This would mark the 20th consecutive year that it has met its annual financial targets. Enbridge expects to finish 2025 at the upper end of its projected range, which translates to adjusted EBITDA growth between 6% and 7.5% for the current year.
Several factors are helping drive its high-end growth outlook. Volumes on its Mainline system are strong, while the U.S. and Canadian dollar exchange rates are favorable. Enbridge will also get a boost from acquiring a 10% interest in the Matterhorn Express Pipeline for $300 million.
A massive and growing backlog
That Matterhorn acquisition was one of several new investments the company has secured this year. It recently approved a $100 million Line 31 expansion of its Texas Eastern Transmission system to serve growing demand from industrial and power companies. It also approved a CA$300 million (US$218 million) expansion of its Aitken Creek gas storage facility to support the western Canadian liquified natural gas (LNG) sector. Additionally, it approved the $900 million Clear Fork Solar project to support Meta Platforms ' data center needs.
These projects helped boost Enbridge's backlog of commercially secured projects to CA$32 billion (US$23.2 billion). The company expects these projects to come online through 2029. That gives the company lots of visibility into its earnings and cash flow growth in the coming years.
Enbridge projects to deliver compound annual adjusted EBITDA growth of 7% to 9% from 2023 through 2026. After 2026, the company anticipates achieving an average annual adjusted EBITDA growth rate of around 5%. For distributable cash flow, Enbridge forecasts a 3% compound annual growth rate through 2026, followed by approximately 5% annual growth thereafter.
The company's "visible growth plans underpin annual expected dividend increases," stated Ebel in the second-quarter earnings press release. Enbridge has increased its dividend for 30 straight years and will likely deliver dividend growth of up to 5% annually for the foreseeable future.
Further supporting the company's growth outlook is its massive pipeline of development projects. Enbridge is currently pursuing about CA$50 billion (US$36.2 billion) of projects across its business. These future investment opportunities include oil and gas pipeline expansions, utility growth projects, and new renewable energy developments. Additionally, Enbridge's strong balance sheet and excess free cash flow after paying dividends provide it with ample financial capacity to continue making accretive acquisitions as opportunities arise.
High-powered total return potential
Enbridge offers investors an attractive, growing dividend and solid earnings growth prospects. With its payout yielding nearly 6% and cash flow expected to rise by 3% to 5% annually, Enbridge could generate total annual returns of around 10%. That's a strong return from such a low-risk company, making it a top-choice investment opportunity.
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