Enbridge (ENB 1.85%) has been one of the best dividend stocks in the oil patch throughout the years. The Canadian pipeline and utility company has increased its payout for 29 straight years. It currently boasts a 7.7% dividend yield, which is well above average.
That big-time payout should continue rising. One factor driving that view is the company's ability to continue expanding its portfolio of income-producing energy infrastructure assets. Enbridge recently added a few more projects to its portfolio, giving it more fuel for its dividend growth engine.
Adding another $500 million to the growth engine
Enbridge recently enhanced its already solid long-term growth profile by making three new accretive capital investments to advance its U.S. Gulf Coast growth strategy. These new investments include:
- A planned expansion of its Gray Oak Pipeline's capacity to 120,000 barrels of oil per day and 2.5 million barrels of additional storage capacity (Phase VII) at Enbridge Ingleside Energy Center (EIEC). It's investing about $100 million into these projects.
- The acquisition of two marine docks and land adjacent to EIEC from Flint Hills Resources for $200 million
- Investing $200 million into offshore pipelines to service the recently approved Sparta development by Shell and Equinor
The first two projects advance the company's Permian export strategy by enhancing its liquids pipeline operations in the Gulf Coast. Enbridge is further expanding EIEC by increasing its storage capacity and export capabilities. The Phase VII expansion project will ultimately increase its total storage capacity at that site to 20 million barrels by next year.
Meanwhile, the new export docks that the company's purchasing at an adjacent terminal will initially enhance its ability to export crude oil from EIEC. It also has the flexibility to reconfigure these docks to export multiple products in the future. Enbridge believes these investments set the stage for EIEC to ultimately become an industry-leading, multiproduct export terminal.
Enbridge is also extending its relationship with Shell. It's forming a new joint venture, Oceanus Pipeline Company, to build a 60-mile oil pipeline and 15-mile gas pipeline to support the Sparta development. Enbridge expects the pipelines to enter service in 2028.
"These accretive investments provide near-term growth in the U.S. Gulf Coast and set the stage for the future expansion through high-quality partnerships and embedded organic opportunities," stated CEO Greg Ebel in a press release. That incremental cash flow will support the company's growing dividend, while the additional expansion potential at EIEC could give it more fuel to increase its payout in the future.
Visibility as far as the eye can see
With these new investments, Enbridge's commercially secured backlog is up to 25 billion Canadian dollars ($18.5 billion) across more than 20 projects. That's in addition to the CA$19 billion ($14.1 billion) it's spending to acquire three premier U.S. natural gas utilities from Dominion Energy, which should close in phases this year.
These investments will fuel transparent earnings growth throughout this decade. It has visibility through at least 2028 when the Sparta pipelines and the CA$4 billion ($3 billion) Sunrise expansion of the T-South pipeline should enter service.
Enbridge also has several expansion projects under development, including additional offshore wind farms in Europe and a lower carbon blue ammonia development associated with EIEC. Securing these and other projects could extend its growth visibility into the next decade.
The company's commercially secured projects and utility acquisitions will fuel 7% to 9% annual growth in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) through 2026. Meanwhile, distributable cash flow per share should rise by around 3% per year during that time frame, slowed down by modest headwinds from tax legislation.
Enbridge expects to continue delivering solid growth after 2026. While it sees adjusted EBITDA growth moderating to around 5% per year, distributable cash-flow growth should accelerate to around that same annual pace. That drives Enbridge's view that it can increase its dividend by as much as 5% annually over the medium term.
Continuing to add more fuel to grow the dividend
Enbridge has secured another $500 million of accretive investments. These projects will supply it with incremental cash flow to support its growing dividend and embedded growth potential from future expansion opportunities.
They add to the company's already impressive slate of growth-focused investments that should help power a steadily rising payout for the next several years. That visibility makes Enbridge an excellent option for those seeking a rock-solid and steadily rising passive-income stream.
Matt DiLallo has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Dominion Energy and Equinor Asa. The Motley Fool has a disclosure policy.
