Enbridge's strong fundamentals drive premium valuations with high growth expectations, but there remains some uncertainty.
Warren Buffett has a famous quote: only buy something that you'd be perfectly happy to hold if the market shut down for 10 years. In my view, from time to time, it is worth asking this question to ourselves before pushing the buy button on specific securities. I present my investment decision criteria and two picks that I would be happy owning without having access to the public market for at least a decade.
President-elect Trump's 25% tariffs on Canadian imports could severely impact Canadian midstream companies like Enbridge and South Bow, though markets remain skeptical. Enbridge and South Bow's long-term contracts provide some mitigation, but increased energy costs could undermine their business models and result in lower valuations and dividend payments. The US and Canadian energy systems' deep integration makes tariffs impractical, potentially leading to higher costs and economic disruption in the US.
Enbridge (ENB -1.78%) is as consistent as they come. The Canadian energy infrastructure giant has paid dividends for nearly 70 years.
Enbridge has a vast midstream network, transporting 30% of North America's crude oil and 20% of U.S. natural gas, along with a 6.15% dividend yield. Despite strong revenue and net income growth, Enbridge's operating cash flow has stagnated, raising concerns about its actual growth pace. The company has a number of growth projects under construction, with a C$27 billion project pipeline at the moment.
Recently, Zacks.com users have been paying close attention to Enbridge (ENB). This makes it worthwhile to examine what the stock has in store.
Enbridge (ENB 0.34%) recently reached a new milestone for dividend growth. The Canadian pipeline and utility operator has now increased its payment for 30 straight years after boosting its payout by 3% for 2025.
Two Canadian midstream names have offered guidance for EBITDA and dividend growth in 2025. TC Energy Corporation (TRP) and Enbridge (ENB) recently provided 2025 financial guidance.
Enbridge and Enterprise Products Partners are top-tier midstream companies, akin to Coke and Pepsi, offering robust dividends and stable cash flows. Both companies have extensive pipeline networks and diversified contracted revenue streams, making them resilient to economic and energy price fluctuations. Enbridge's strategic acquisitions and Enterprise's strong balance sheet enhance their long-term growth prospects, which analysts estimate at 6% to 7% long term.
Dividend stocks can be terrific investments. In addition to generating dividend income, they have historically produced strong total returns.
Enbridge's stable cash flows, recent acquisitions, and attractive pricing support its continued 'buy' rating despite mixed profitability metrics and rising interest expenses. The company's significant revenue growth, strategic investments in renewable energy, and robust future cash flow projections highlight its potential for sustained growth. Management's plans for substantial capital investments and maintaining a healthy leverage ratio reinforce confidence in Enbridge's long-term prospects.
ENB and BIP have impressive track records of generating attractive total returns and consistent inflation-beating dividend growth. They are both high-quality diversified infrastructure companies with defensive, inflation-resistant models. I compare them side-by-side and share my view on why only one is a buy right now.