Enbridge (ENB 1.49%) has been a very enriching investment over the years. The Canadian pipeline and utility giant has paid dividends for over 70 years, with increases in each of the last 30 years. The energy company’s steadily growing income and earnings have helped fuel strong total returns over the decades. Enbridge has generated a 12% annualized total return over the past 20 years. That has grown a $25,000 investment into over $241,157.
Enbridge is in a strong position to continue growing shareholder value in the future. Because of that, it could help set you up for life, depending on how much you invest in the energy giant and how long you hold your shares.
An attractive base return
Enbridge operates one of the largest energy-infrastructure franchises in North America. It owns the longest and most complex crude oil and liquids transportation system on the continent, moving 30% of all the oil produced in North America. Enbridge also has an unrivaled gas infrastructure platform that moves 20% of all gas consumed in the U.S. It also owns the continent’s largest natural gas distribution franchise. Finally, the company has a large-scale and growing global renewable power business.
The company’s pipeline and utility businesses generate very stable cash flows. About 98% of its earnings come from predictable cost of service or contracted assets. That provides Enbridge with a very stable and slowly rising income stream.
Enbridge pays 60% to 70% of its stable earnings in dividends. That payout currently yields 6.1%, providing investors with a very attractive base return. For example, investing $25,000 into Enbridge stock right now would produce over $122,700 in cumulative dividend income over the next 30 years at that rate. That assumes Enbridge doesn’t increase its payment, and you don’t reinvest your dividends into more Enbridge shares.
Solid growth potential
Enbridge’s high-yielding dividend is only part of its return. The company has an excellent record of growing its earnings and dividend, which should continue.
The company currently has 29 billion Canadian dollars ($20.3 billion) of secured capital projects under construction that should come online through 2029. Those projects include expanding its liquids pipeline business, new natural gas transmission projects, growth in its gas distribution and storage franchise, and more renewable energy projects. Meanwhile, it has CA$50 billion ($35 billion) of additional expansion projects under development that it could capture through the end of the decade. Given the expected growth in energy demand in the future and the company’s exposure to lower carbon energy like natural gas and renewables, Enbridge should be able to continue growing its operations in the coming decades.
Enbridge estimates it can fund CA$9 billion to CA$10 billion ($6.3 billion to $7 billion) of expansion projects each year through post-dividend free cash flow and its strong balance sheet capacity. The company anticipates that this investment level will increase its cash flow per share by 3% per year through 2026 and by around a 5% annual rate after that once it gets past a near-term, tax-related headwind. That should support dividend growth of up to 3% annually through next year and as much as 5% per year post-2026.
An attractive total return
Enbridge’s growing earnings and dividend add to its total return potential. With its dividend yielding over 6% and its cash flow rising by about 5% annually over the long term, Enbridge could generate total annual returns of about 11% per year.
That could really add up over the long term. For example, investing $1,000 today and an additional $250 per month at that rate would grow to over $1 million in 35 years.
There’s no guarantee Enbridge will deliver this level of return over the next several decades. However, it has a solid record of generating strong returns in the past and has plenty of fuel to continue producing attractive total returns in the future.
A potentially very enriching investment opportunity
Enbridge has been a wealth-building stock over the decades. It’s in an excellent position to continue growing shareholder value in the future. It certainly has the fuel to potentially set investors up for life if they buy enough shares that they hold for the long haul and the company continues to generate strong total returns. That makes it an attractive long-term investment opportunity.
