Enbridge (ENB -2.23%) is one of the most reliable dividend stocks in the energy sector. The Canadian energy infrastructure juggernaut has increased its payout for 27 straight years. Its most recent increase of 3% pushed its dividend yield up to 6.4%.
That upward trajectory in the dividend is showing no signs of ending anytime soon. Enbridge has plenty of fuel to grow its cash flow over the coming years, which should support continued dividend increases. That makes it a great stock for investors seeking a sustainable passive income stream.
Ending 2021 on a high note
Enbridge recently reported strong results to end 2021. The company generated $10 billion Canadian ($7.9 billion) in distributable cash flow. That was up 6% from 2020's total and at the high-end of its guidance range.
The primary driver was the partial benefit from CA$10 billion ($7.9 billion) of expansion projects placed into service last year, led by the Line 3 Replacement Project. The company also received some benefit from its $3 billion acquisition of Moda Midstream, which included the Ingleside Energy Center. These new additions to its portfolio combined with the strong operating performance from its legacy assets to drive its 2021 results. That more than offset the CA$1.2 billion ($950 million) of assets it sold to help finance its expansion.
Plenty of power to grow in 2022 and beyond
Enbridge's 2021 investments are providing the fuel for accelerated growth in 2022. The company sees its distributable cash flow rising by 8% at the mid-point of its guidance range. That's more than enough to cover the increased dividend. At the midpoint, Enbridge will have a dividend payout ratio of 64% in 2022. The company will benefit from a full year of its recently completed expansion projects -- with Line 3 providing significant cash flow growth this year -- and the Moda acquisition. In addition, it has several more expansion projects slated to enter service during 2022 that will provide some incremental cash flow.
One notable 2022 project is installing 60 megawatts of solar energy to the recently acquired Ingleside oil export facility. This investment will enable that facility to generate net negative emissions. Enbridge also expects to finish one of its offshore wind energy facilities in Europe by year-end and several other natural gas infrastructure projects.
Overall, Enbridge has CA$10 billion ($7.9 billion) of secured capital projects to power growth through 2024. These are primarily natural gas and renewable energy infrastructure investments. This backlog should support 5% to 7% annual cash flow per share growth for Enbridge over the next few years. That should enable Enbridge to continue increasing its dividend.
Meanwhile, Enbridge is working on securing new investment opportunities to extend its growth forecast. Between the excess cash it retains after making dividend payments and its balance sheet capacity, Enbridge has the financial flexibility to spend CA$5 billion to CA$6 billion ($3.9 billion-$4.7 billion) per year on expansion projects, acquisitions, and share repurchases. It's increasingly focusing on capturing low carbon investment opportunities to drive longer-term growth. For example, it's partnering with several other entities on a potential carbon capture and storage hub in Alberta that could sequester 4 million tonnes of carbon dioxide emissions annually. It's also making early stage investments in renewable natural gas and hydrogen. These early investments could lead to even bigger long-term expansion opportunities that could drive growth in the future.
A durable passive income stream
Enbridge has an exceptional dividend track record that it's unlikely to break anytime soon. The company is using the cash flows produced by its legacy fossil fuel infrastructure to pay its dividend and expand into cleaner energy sources. Those investments should pay dividends in the coming years, giving Enbridge the fuel to keep growing its payout. Combine that growth with Enbridge's high dividend yield, and it's a surefire way to generate steady passive income.