Enbridge Will Bring You High Dividends and Growth (NYSE:ENB)

Enbridge (NYSE:ENB) (TSX:ENB:CA) is one of the largest midstream companies in the world, with a market capitalization of $80 billion. The company has a dividend yield of over 7% and is one of the most impressive midstream assets portfolios in the industry. As we will see in this article, this supports the company’s ability to continue to drive shareholder returns.

Enbridge Half Year Update

Enbridge performed well ahead of the company’s half-year results update.

The company has managed to fund acquisitions, including its $14 billion major acquisition of Enbridge Gas. It still has a huge debt load, and its debt-to-EBITDA ratio of 4.7x is at a level the company can support. However, if interest rates remain higher for an extended period, this could significantly increase the company’s costs.

The company continued to grow, approving new projects including both the company’s pipelines and solar assets. Overall, the company continued to deliver.

Acquisition of Enbridge Gas

Enbridge bought three major gas companies for $14 billion, expanding its utilities portfolio.

These are companies we will discuss in more detail later, but their rate base is expected to grow 8% annually through 2027 and beyond. Additionally, all of these assets are located in population growth centers. The recent acquisition close will enable the company to generate reliable and growing cash flow, allowing for a growing dividend.

Enbridge Segment Performance

Enbridge continues to deliver strong performance across all of its segments.

The company’s primary liquids pipeline continues to achieve record volumes, with throughput in Q2 at 3.1 million barrels per day. The company is working to increase supplies and expects additional exits and volumes. This will help the company increase revenues and, therefore, earnings by the end of the decade.

The company’s Permian franchise also continues to grow. The company’s Gray Oak pipeline will have more than 20 million barrels of storage capacity in Ingleside. The company has set quarterly export records and we expect it to continue to grow here.

Enbridge’s GTM (gas and midstream) portfolio continues to grow, while the Permian Basin has also expanded. The company has reached a negotiated agreement, with base rates +6% through 2025 and a further 3% increase in 2026. The company has also acquired a 19% stake in the Whistler JV and announced the FID of the Blackcomb pipeline.

The company’s significant additional investment on the Gulf Coast will help it continue to generate strong profits.

The company is building the largest natural gas utility in North America. The company has 3 utilities that are generating near double-digit returns on equity, with over 6 million customers in those assets. All of these assets are located in population centers that continue to grow, which will continue to support the company’s renewable base.

The company is also building a massive renewable business to help diversify, with nearly 500 megawatts of assets commissioned. The company has numerous assets here and numerous contracts with large companies. This includes companies like AT&T and Amazon, which are looking to build large data centers powered by renewable energy.

This will help Enbridge diversify.

Enbridge Financial Results

The company is committed to achieving financial results and generating high profits for shareholders.

The company managed to increase adjusted earnings before interest, tax, depreciation and amortization (EBITDA) by 8% YoY, which is continued in the company’s YTD results. The company’s gas distribution and storage business is growing the fastest. The company’s DCF remained extremely strong and grew at a mid-single-digit pace YoY, enabling future shareholder gains.

The company’s outstanding shares rose slightly, which impacted its DCF per share despite the dollar increase. Despite the warm weather, the company continues to see a number of favorable tailwinds that help it stay afloat. The company’s DCF is highly profitable, and the company can generate double-digit overall shareholder returns.

Thesis Risk

The biggest risk to our thesis is the company’s debt burden. The company has a huge debt load, but investors are betting on falling interest rates. If interest rates remain higher for an extended period of time, it will hurt the company’s ability to generate future profits, making it a poor long-term investment.

Application

Our concerns about Enbridge are the company’s debt. The company has a long-term portfolio with low interest rates, but if interest rates remain elevated for an extended period of time, the company’s debt-to-EBITDA ratio of 4.7x could hurt its ability to generate future returns. The company has the ability to deliver double-digit returns above the S&P 500 through both dividends and future growth.

The company has an incredibly strong portfolio of assets. It pays a strong dividend of around 7% that it can continue to grow, and on top of that, the company has extra cash that it continues to invest in growth capital. All of this makes Enbridge a valuable long-term investment. Let us know what you think in the comments below.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.