In 1949, Interprovincial Pipe Line (IPL) Company began building the first pipeline for exporting oil from Canada to the U.S. Seventy-six years later, that company's pipelines transport around 65% of Canadian oil destined for the U.S. and 30% of crude oil produced in all of North America.
Never heard of IPL? That's understandable. The company changed its name to Enbridge (ENB -0.32%) in 1998.
I didn't know Enbridge's full history when I first initiated a position in its stock a few years ago. However, the more I learn about the company, the more I like it. Here are three reasons why I keep buying more Enbridge shares.
Image source: Getty Images.
1. I like the dividend
The thing I immediately think of when Enbridge's name comes up is the company's dividend. Simply put, I like everything about the dividend.
For one thing, Enbridge's forward dividend yield stands at 5.8%. That's a juicy yield that should grab the attention of any income investor. Even investors who aren't seeking income may be impressed by the fact that an initial investment of $10,000 in Enbridge at its initial public offering (IPO) in 1994 would now be worth nearly $184,000 -- thanks largely to reinvesting dividends.
I'm also impressed by Enbridge's dividend track record. The company has increased its dividend for 30 consecutive years. That's a streak I don't expect to end anytime soon, with Enbridge's continued free-cash-flow growth and its distributable cash-flow payout of between 60% and 70%.
2. Enbridge's business is steady and resilient
Maybe I'm just being paranoid, but I have a feeling the stock market is poised for a major downturn. Valuations are at historical highs. The full impact of tariffs probably still hasn't been felt by the economy. Inflation is still weighing on consumers.
While I invest for the long term and have always resisted the urge to sell in panic when the stock market tanks, I'm highly selective about which stocks I buy with the current dynamics. Enbridge's steady and resilient business makes it easier for me to buy more shares.
The Trump administration has exempted Canadian oil and gas imports from tariffs, so that's not an issue for Enbridge. Around 80% of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) is protected from inflation. Enbridge has minimal exposure to commodity prices.
The company's acquisitions in recent years have made its cash flows even more reliable. Enbridge is now the largest natural gas utility in North America based on volume. The bottom line is that the underlying business behind this stock is both predictable and safe.
3. The company's growth prospects are solid
A dividend stock that can be described as steady and resilient usually doesn't deliver sizzling growth. I don't expect Enbridge to be another Nvidia. However, the company's growth prospects are solid. And the same artificial intelligence (AI) tailwind at Nvidia's back should also help Enbridge.
The data centers that host AI applications consume massive amounts of power. As agentic AI and other new uses of the technology gain widespread adoption, the demand for electricity will almost certainly increase significantly.
Roughly 43% of U.S. electricity was generated by natural gas in 2023, according to the U.S. Energy Information Administration. Another 16% was generated from coal-powered plants. But a major switch from coal to natural gas is underway. This is great news for Enbridge.
The company foresees around $50 billion of growth opportunities through 2030. That's nearly equal to the amount of revenue it made last year. Unsurprisingly, almost half of those growth opportunities ($23 billion) are in Enbridge's gas transmission business.
Again, I don't predict that Enbridge will deliver the kind of growth that will knock the socks off investors. However, I think the stock will produce double-digit percentage total returns over the long run with its attractive dividend included. That's enough reason for me to want to keep buying shares of this amazing dividend stock.
