The 6.5% dividend stock just finished the final phase of a once-in-a-generation opportunity

Last fall Enbridge (ENB -0.19%) made a bold attack. The Canadian pipeline and energy giant has agreed to buy from three natural gas companies Control in a deal valued at $14 billion. The deal would create the largest natural gas franchise in North America.

At the time, Enbridge CEO Greg Ebel said, “Adding natural gas businesses of this scale and quality, at a historically attractive multiple, is a once-in-a-generation opportunity.” Although it took just over a year, the company finally closed on this generational opportunity to grow its gas business utility business. The transaction significantly increases the company’s ability to sustain and grow Efficiency 6.5%. dividend.

Closing the final phase

Enbridge recently announced that it has completed its acquisition of Public Service Company of North Carolina (PSNC) from Dominion. The agreement covers more than 600,000 service customers in the state, which serves more than 23,000 miles of gas distribution and transmission networks pipelines and other related gas infrastructure assets.

The utility should provide Enbridge with stable, low-risk cash flows backed by government-regulated rate structures and steady gas demand. These flows are expected to increase in the coming years as Enbridge invests in expanding PCSS infrastructure to meet growing gas demand in the region it serves.

The closing of the acquisition of PCSS was the final stage of this transformational transaction. Enbridge previously completed its purchase of The East Ohio Gas Company in March and completed its transaction with Questar Gas Company in June.

Three natural gas utilities significantly expand Enbridge’s gas distribution platform. It will contribute 22% of the company’s annual adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), compared to 12% before the transaction. This allowed the company to further diversify its business while increasing its exposure to lower carbon energy.

The new gas companies also increased the company’s cash flow from stable regulated assets and strengthened its growth profile. Enbridge expects to invest C$5 billion ($3.7 billion) over the next three years in low-risk, quick-return projects. what will increase their income from these media.

Strengthening an already strong foundation

Enbridge has built one of the lowest-risk companies in the energy infrastructure sector. The company has a diversified platform focused on four core franchises: fluids pipelines (50% of EBITDA), gas transmission and midstream (25%), gas distribution and storage (22%), and renewable energy (3%).

Approximately 98% of the EBITDA generated in these businesses comes from the cost of services or contracted assets, which are very predictable and stable. As evidence, Enbridge has achieved its annual financial guidance for 18 consecutive years, despite two major recessions and two additional periods of oil market turmoil.

The company intends to pay investors 60% to 70% of its very stable cash flows in the form of dividends. He keeps the rest to invest in it big backlog of commercially secured capital projects. The utility acquisitions brought the company’s pipeline of projects it should complete by 2028 to C$24 billion ($17.8 billion). These projects give the company a lot of insight into future earnings growth.

The company expects that these projects will increase EBITDA by approximately 5% annually. Meanwhile, it has additional investment opportunities thanks to its strong balance sheet, which it can use to sanction additional expansion projects and make significant acquisitions, further increasing its growth rate.

With a strong financial profile and visible earnings growth, Enbridge should have plenty of fuel to continue increasing its dividend. In the medium term, it may increase the dividend by up to 5% annually, i.e. further extension of the streak it is now 29 years in a row.

Elite dividend stocks

Enbridge has closed on a once-in-a-generation opportunity to add three high-quality natural gas companies to its portfolio. They increase the stability of the earnings base, increase diversification and strengthen the growth profile.

This puts Enbridge in an even stronger position to continue increasing its dividend. This makes it an excellent dividend stock to buy for the long term.

Matt DiLallo has positions at Enbridge. The Motley Fool takes positions on and recommends Enbridge. The Speckled Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.