Enbridge (ENB -0.51%) has an unceasing record of paying dividends. The Canadian energy infrastructure behemoth has paid its shareholders dividends for over 68 years and has increased its payment in the last 28 straight years.

That dividend-growth streak isn't likely to stop anytime soon after Enbridge agreed to acquire three natural gas utilities from Dominion (D -0.49%) in a $14 billion all-cash deal. The transaction will supply it with even more steady and growing cash flow to support its dividend.

A "once-in-a-generation" opportunity

Enbridge is acquiring The East Ohio Gas Company, Questar Gas Company (and its related Wexpro companies), and Public Service Company of North Carolina in separate deals with Dominion. It's paying $9.4 billion in cash and assuming $4.6 billion in debt. The $14 billion deal values the utilities at 1.3x enterprise value-to-rate base and 16.5 times price-to-earnings

The transactions will create North America's largest gas utility platform. Enbridge's utilities will supply 9.3 billion cubic feet of natural gas per day to 7 million customers.

Following the deal, Enbridge's gas utility business will provide 22% of its annual earnings, up from its current level of 12%. Overall, lower carbon energy (natural gas and renewables) will make up 50% of the company's business mix post-transaction, up from 43% currently.

"Adding natural gas utilities of this scale and quality, at a historically attractive multiple, is a once-in-a-generation opportunity," stated Enbridge CEO Greg Ebel in the press release unveiling the deal. He further commented, "The transaction is expected to be accretive to DCFPS (distributable cash flow per share) and adjusted EPS (earnings per share) in the first full year of ownership, increasing over time due to the strong growth profile."

Enbridge expects to invest 1.7 billion Canadian dollars ($1.2 billion) annually in low-risk, fast-payback capital projects over the next three years. Those investments should grow the stable cash flow these utilities produce.

The company is leveraging its strong balance sheet to fund the deals, which it expects will close by the end of next year. It's initially issuing CA$4 billion ($2.9 billion) in stock to get a head start funding the deal. It also plans to sell bonds, recycle capital, and potentially issue more shares to fund the balance.

While there is some financing risk, Enbridge has plenty of time to find the best ways to fund the deals without impacting its dividend or balance sheet. The company expects to maintain a leverage ratio within its 4.5x-5x times target range after closing the deal.

Enhancing the dividend

The gas utility acquisitions will add a trio of low-risk businesses with predictable cash-flow profiles to Enbridge's business mix. They fit within the company's pipeline-utility strategy of owning durable energy infrastructure assets that produce stable and growing cash flow backed by long-term contracts and government-regulated rate structures.

A slide showing how the Dominion transactions will further diversify Enbridge.

Image source Enbridge.

The deal will lower Enbridge's overall risk profile by increasing its earnings from regulated utilities and lower carbon energy sources while reducing its exposure to oil and other liquids. The increased income from stable utilities will enhance Enbridge's cash-flow profile. That will put its high-yielding dividend (currently 7.9%) on an even firmer foundation.

Meanwhile, the utility acquisitions will grow Enbridge's cash flow, supporting its ability to continue increasing its dividend. The deals will be immediately accretive to its cash flow per share.

They will also enhance the visibility of its longer-term outlook of growing earnings by about 5% per year. That should support dividend growth by as much as 5% annually over the medium term.

Enhancing an already strong business

Enbridge already has one of the lowest-risk business models in the energy sector. Its diversified portfolio of regulated and highly contracted energy infrastructure businesses generates very predictable and growing cash flow. They've given it the fuel to pay a very attractive and growing dividend.

The company will further enhance the quality of its cash flow by acquiring three natural gas utilities from Dominion. It's using its strong balance sheet to capitalize on what it views as a once-in-a-generation opportunity to buy high-quality utility businesses at an attractive price.

They will further enhance the quality of Enbridge's cash flow, putting its dividend on an even more sustainable foundation. That makes its big-time payout look even more attractive for investors seeking a low-risk income stream.