With the TSX nearing all-time highs and economic conditions potentially heading for some turbulence, it makes sense to look for companies that are industry leaders and have delivered steady dividend growth over several economic cycles.
Enbridge
Enbridge (TSX:ENB) is a great example of a leading Canadian dividend stock that investors can rely on to generate passive income and long-term total returns. The board has increased the dividend for 30 years in a row, supported by sales and cash flow growth.
Enbridge is one of Canada’s largest companies with a current market capitalization of more than $140 billion. The energy infrastructure giant’s energy transmission assets transport roughly 30% of the oil produced in Canada and the United States and about 20% of the natural gas consumed by U.S. businesses and households.
Last year, Enbridge spent $14 billion to buy three natural gas companies in the United States. These assets complement the existing transmission network and ensure Enbridge can take advantage of the expected increase in natural gas demand as new gas-fired power generation facilities are built to supply electricity to energy-hungry AI data centers.
Enbridge strengthened its renewable energy division when it bought the third-largest U.S. wind and solar developer. The company recently announced a major solar facilities deal that will provide power to a single AI data center customer. Enbridge is also a partner in major offshore wind projects in Europe.
International demand for North American energy is increasing as countries look for reliable supplies from stable producers. Enbridge expanded into energy exports in recent years to capture some of these opportunities through its acquisition of an oil export terminal in Texas and its stake in the Woodfibre liquefied natural gas (LNG) export facility being built in British Columbia.
The move to diversify its asset base in recent years has allowed Enbridge to generate a more balanced revenue stream with a higher component coming from rate-regulated utilities that tend to deliver predictable and reliable cash flows.
Looking ahead, Enbridge could benefit from Canada’s renewed interest in building new major energy infrastructure to get oil and natural gas to its coastal export facilities. Previous efforts failed due to regulatory barriers and opposition from various stakeholders, but there is a new sense of urgency to reduce Canada’s dependence on the United States for sales of energy products. If obstacles to building new major oil and natural gas pipelines are removed, Enbridge would be a good candidate to participate in the projects.
In the meantime, Enbridge is pursuing a $32 billion capital program that is expected to boost distributable cash flow by approximately 5% per year over the medium term. This should support continued dividend increases. Investors who buy ENB shares at the current price can get a dividend yield of 5.7%.
The bottom line
Short-term volatility is expected in the broader market, so a downtrend could be in store for ENB if the market pulls back. Any weakness would be seen as an opportunity for ENP investors to add to their position.
Enbridge pays an attractive dividend that should continue to grow. If you have some money to put to work, this stock deserves to be on your radar.
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