Enbridge (ENB -0.71%) offers investors an attractive dividend yielding 6.6%. Concerns about its long-term growth potential as the world transitions away from fossil fuels are a big reason the yield is so high.

However, the Canadian energy infrastructure behemoth continues to showcase that it has plenty of growth ahead. The latest evidence came in its first-quarter results. It adds fuel to the view that Enbridge can continue increasing its dividend as it has done for the last 28 straight years.  

Strong financials back the dividend

Enbridge recently reported solid first-quarter results. The pipeline giant produced 3.2 billion Canadian dollars ($2.4 billion) of distributable cash flow, up from CA$3.1 billion ($2.3 billion) in the year-ago period. The company benefited from strong volumes on its mainline oil pipeline system and the acquisition of larger ownership interests in the Gray Oak and Cactus II pipelines.

CEO Greg Ebel commented on the company's results in the earnings report. He stated: "We are very pleased with a strong start to 2023 and how our low-risk business model continues to deliver in all market cycles. Our first quarter results were right in line with our expectations despite extreme volatility in both financial and commodity markets." 

The company generated ample cash in the period to pay dividends and invest in expanding its four core energy infrastructure businesses. The company only paid 56% of its first-quarter cash flow via dividends. That allowed it to retain significant cash to help fund its expansion projects and maintain a strong financial profile. Enbridge ended the quarter with a 4.6 times leverage ratio, at the low end of its 4.5-5.0 times target range. That gives it tremendous financial flexibility to continue growing in the future.

Enbridge's steady and growing cash flows, conservative dividend payout ratio, and strong balance sheet put its dividend on a very firm foundation.

Adding more fuel to its growth engine

Enbridge also continues to find new ways to grow its fossil fuels and low-carbon businesses. It recently agreed to acquire a natural gas storage facility in British Columbia, enhancing its ability to support liquified natural gas (LNG) exports from that province. The company also secured a $229 million expansion of its Enbridge Houston Oil Terminal. That added to its CA$17 billion ($12.6 billion) commercially secured project backlog. 

Meanwhile, "On the lower-carbon front," stated Ebel, "we enhanced our renewable power portfolio with the announcement of the successful award to design and construct the Normandy offshore wind farm and announced a joint venture with Yara International to construct a blue ammonia project on the U.S. Gulf Coast." 

The potential project with Yara could benefit its fossil fuels and lower carbon platforms. The proposed location is near the company's Texas Eastern pipeline system, which would supply low-cost natural gas to the facility. It would also benefit its Enbridge Ingleside Energy Center, which would export ammonia to global markets. Meanwhile, the project could support Enbridge's carbon capture and storage joint venture with Occidental Petroleum (OXY 0.07%). Enbridge would build the pipeline infrastructure to transport captured carbon dioxide from the ammonia plant and other facilities to a sequestration hub Occidental Petroleum would develop. Carbon capture represents a potentially lucrative opportunity for Enbridge and Occidental Petroleum. 

With a leverage ratio near the bottom end of its target range, Enbridge has "the financial flexibility to continue adding to our organic growth backlog and to execute selective tuck-in M&A." The company believes it can secure billions of dollars of additional expansion projects each year across its four core platforms -- liquids pipelines, gas transmission, gas distribution and storage, and renewables. It also sees lots of growth potential from emerging new energy technologies like renewable natural gas, carbon capture and storage, and hydrogen.

Enbridge believes these drivers will give it the fuel to grow its distributable cash flow per share by around a 5% annual rate over the medium term. That will empower it to continue increasing its dividend.

Enbridge's dividend is unstoppable

Enbridge is closing in on three decades of increasing its dividend. Despite the energy transition, that upward trend should continue. Enbridge keeps finding ways to expand its fossil fuels business while also moving further into lower-carbon energy. Those dual drivers should grow its cash flow for years to come, giving Enbridge plenty of power to continue increasing its dividend.