Enbridge (ENB 0.77%) has been an outstanding dividend stock over the years. The Canadian energy infrastructure giant recently declared its 27th consecutive annual dividend increase. That puts it in the elite territory of a Dividend Aristocrat. While Enbridge doesn't officially qualify for that designation because it's not a U.S. company and therefore ineligible for inclusion in the S&P 500, that's still an impressive streak. Moreover, Enbridge has grown its payout at a 10% compound annual rate during that time.
The company's 2022 raise isn't quite that high. However, it probably isn't the last one, either. Here's a closer look at what Enbridge sees in 2022 and beyond.
Healthy growth ahead in 2022
Enbridge recently announced its 2022 financial guidance. The Canadian company expects to generate between $15 billion and $15.6 billion Canadian ($11.8 billion-$12.3 billion) of earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2022, up about 9% from 2021's guidance. Meanwhile, it expects to produce CA$5.20-CA$5.50 per share ($4.09-$4.32) of distributable cash flow, about 10% higher than its 2021 expectation. The main growth driver is the CA$10 billion ($7.9 billion) of expansion projects the company completed this year.
That's giving Enbridge the fuel to increase its dividend by 3% in 2022. That will help nudge up its already above-average 7.2% dividend yield. It also puts its dividend payout ratio at around 64%, right around the midpoint of its 60% to 70% target range.
The main reason the company has such a high dividend yield is that it trades at a low valuation. It sells for about 9 times its 2022 cash flow forecast at the midpoint. Enbridge therefore also authorized up to $1.5 billion in share repurchases that could further boost its cash flow per share in 2022.
Meanwhile, the company plans to continue investing in expanding its portfolio. It expects to complete CA$4 billion ($3.1 billion) of expansion projects in 2022 as part of a CA$9 billion ($7.1 billion) backlog.
More growth ahead
Enbridge also provided an updated three-year outlook. It expects to grow its distributable cash flow per share at a 5% to 7% annual rate through at least 2024. That should support continued dividend growth of up to that same rate during this timeframe.
Fueling the company's growth is its ongoing expansion program. Enbridge sanctioned CA$2.2 billion ($1.7 billion) of new projects in 2021, including two more offshore wind farms in Europe, several solar energy self-power projects, and some additional oil and gas pipeline projects.
Overall, Enbridge has the financial capacity to invest CA$5 billion to CA$6 billion ($3.9 billion-$4.7 billion) per year on expansion projects or other value-enhancing initiatives like share repurchases or acquisitions. The company firmly believes it will be able to continue securing new investments to power future growth. It has several opportunities in the pipeline, including a potential expansion of its T-South pipeline and a carbon capture and storage project in Canada. It's also exploring additional lower-carbon investment opportunities like green hydrogen and more renewable energy projects. Securing these and other investment opportunities will enable Enbridge to continue growing its cash flow at a healthy rate beyond 2024.
A great stock for a growing income stream
Enbridge has one of the energy sector's better dividend growth track records. Given its financial capacity and secured project backlog, the company doesn't anticipate that its dividend growth streak will end anytime soon. Enbridge stands out as a great stock for investors seeking sustainable income growth.