After much debate about whether tariffs would actually be imposed, President Donald Trump has officially implemented them on goods from Canada and Mexico. Dividend investors might be wondering how these tariffs will affect Canadian companies that have significant U.S. operations. As announced Tuesday, energy imports from the Great White North are subject to a charge of 10%.
Enbridge (ENB +0.78%), a diversified energy company headquartered in Calgary, Alberta, is likely drawing considerable investor attention -- especially with respect to its stock's ultra-high-yield dividend, which provides a 6.1% dividend yield at Tuesday's prices.
NYSE: ENB
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Digging into the details on the dividend
Enbridge's generous yield isn't the only factor that makes the pipeline stock an alluring option for those looking to pump ample passive income into their portfolios. In December, the company announced a 3% increase to its quarterly dividend to $0.9425 per share, or $3.77 annualized. As a result of this hike, Enbridge has now raised its dividend for 30 consecutive years.
Over the past decade, however, the company's dividend raises have dwarfed this recent 3% hike. Should the company return $3.77 per share to investors in 2025, it will have raised its dividend at a compound annual growth rate of 7.3% since 2015.
Although there's no guarantee that the company will continue to match the pace at which it has hiked the dividend recently, management seems keen on continuing to reward shareholders with a growing payout. Whereas Enbridge has returned $35 billion to shareholders since 2020, management projects returning $40 billion to $45 billion over the next five years.
Is Enbridge fearful of the tariffs disrupting its business?
The importance of the United States as a destination for Enbridge's oil and gas pipelines is hardly negligible. According to the company, Enbridge's operations represent 65% of all U.S.-bound Canadian oil exports, as well as 40% of U.S. oil imports. Recognizing this, investors may fret that the newly implemented tariffs will adversely impact the company's financials.
At this point, however, management doesn't seem to be losing sleep over this issue. Two weeks after the White House released a fact sheet that identified the tariffs to be implemented, Enbridge held its fourth-quarter 2024 financial-results presentation. On the conference call, Enbridge CEO Greg Ebel responded to a question about tariffs affecting the company's capital allocation plans regarding infrastructure projects, stating, "I would say unless it's a very high tariff and on a prolonged basis, we just don't see significant changes on that front."
Colin Gruending, Enbridge's President for Liquid Pipelines, reinforced this idea, stating his belief that tariffs won't likely impact oil pipeline volumes. Ebel later added that the company has "a lot of confidence that the tariff issue is not particularly material."
A major source of Enbridge's export business to the United States comes from the Mainline pipeline system. Approximately 8,600 miles long, the Mainline pipeline network averaged 3.1 million barrels of light, medium, and heavy oil from Alberta to the U.S. Midwest and Eastern Canada daily in 2024. From 2025 to 2028, Enbridge projects $2 billion in capital expenditures to the Mainline pipeline network to advance operational efficiencies and system reliability.
What should investors look for moving forward?
While the knee-jerk reaction may be to conclude that Enbridge's business is in jeopardy -- including the dividend -- investors shouldn't be swayed much by the implementation of tariffs on Canadian energy exports. The company's business model is solid. In addition to having more than 95% of its customers rated as having investment-grade balance sheets, Enbridge reports that 80% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) is generated from assets that have inflation protection built into the contracts.
For present or potential Enbridge shareholders, Tuesday's news shouldn't fuel their anxiety or motivate them to keep their distance from Enbridge stock.
