Alert, All Investors: Enbridge (TSX:ENB) Stock Raised Dividend by 10%. Why it’s Still a Solid Buy

Enbridge (TSX:ENB)(NYSE:ENB) now yields 6.3% and offers wonderful total returns at a decent valuation.

| More on:

Yesterday, Enbridge (TSX:ENB)(NYSE:ENB) did not disappoint. The dividend stock raised its quarterly dividend by nearly 9.8% from $0.738 to $0.81 per share. The new dividend will be payable in March 2020.

The dividend raise marked the 25th consecutive year of dividend increases for the Dividend Aristocrat. Enbridge’s dividend-growth history is remarkable. From 2010 to 2020, it nearly quadrupled its dividend, which translated to average increases of 14.3% per year.

Simultaneous with the dividend hike, Enbridge also reaffirmed its guidance for 5-7% per year in average long-term growth for its distributable cash flow per share via embedded and organic growth without having to raise equity.

The distributable cash flow per share financial metric is critical, because it’s what management looks at to determine the amount to raise the dividend.

It follows that over the long term, instead of dividend increases in the double digits, investors can expect more modest growth of 5-7% per year instead — unless Enbridge makes accretive acquisitions.

Based on the new and bigger dividend, Enbridge stock now offers a forward yield of 6.3%. Its five-year average yield is close to 4.6%, which implies a price target of over $70 per share or upside potential of 38%.

This is not far-fetched given today’s low interest rate environment. People close to retirement are arriving at the scene by the boatload. Many of them need income. However, it’s rare to find proven dividend-growth stocks with large-scale businesses at reasonable valuations today. Enbridge is one of the few.

As the largest energy infrastructure company in North America, Enbridge’s energy storage and transportation services are simply essential to the everyday lives of North Americans. Its contracted cash flow and a reasonable distributable cash flow payout ratio result in a high-quality dividend.

The following is what Enbridge has achieved over the last few years. Since the acquisition of transformative Spectra Energy in the south in early 2017, Enbridge has fully integrated its assets, sold $8 billion of non-core assets, simplified its corporate structure, and reduced its leverage ratio, all the while maintaining its dividend-growth streak in a responsible way.

In a recent press release, management stated that their near-term priorities will be to focus on preserving its strong balance sheet, returning capital to shareholders through its dividend, and executing low-risk, capital-efficient organic growth opportunities.

The bottom line

Going forward, even assuming no price appreciation from multiples expansion, a 5-7% growth rate combined with a 6.3% yield leads to total returns of roughly 11-13%. These are the kinds of returns that all investors on the planet will drool over the low-risk investment that Enbridge stock is.

Reasonably valued Enbridge stock is a solid buy in today’s low interest rate world. The rising passive income it provides will prevent inflation from eating away your purchasing power.

Should you invest $1,000 in Bausch Health Companies right now?

Before you buy stock in Bausch Health Companies, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bausch Health Companies wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Enbridge. The Motley Fool owns shares of and recommends Enbridge.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

This Canadian Monthly Dividend Stock Pays a Stunning 9% Yield

Pro REIT is a Canada-based real estate company that offers you a forward yield of 9% in 2025. Is this…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How I’d Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income

Canadians looking for ways to make the most of the new TFSA contribution room should consider investing in these two…

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

This Dividend King Paying 7.5% in Monthly Income Is a Must-Have

This high-yield TSX stock might not be a textbook Dividend King, but its reliable monthly payouts and improving financials make…

Read more »

path road success business
Dividend Stocks

How to Invest $50,000 of Tax-Free Cash as Canada-US Trade Uncertainty Escalates

Few Canadian stocks are as easy a choice as this one, making it perfect during volatile periods.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Generate $200 in Monthly Income With a $7,000 Investment

Want to establish $200 in monthly income (or even more?) Here's an easy way to start today that will provide…

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

Got $25,000? Turn it Into $250,000 in a TFSA as the Canadian Dollar Rises

Investing doesn't have to be risky or difficult, especially with this top stock.

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

Where Will Loblaw Be in 3 Years?

Loblaw (TSX:L) stock could be a stellar performer as tariffs and headwinds move in on Canada's economy.

Read more »

customer uses bank ATM
Dividend Stocks

Where Will National Bank Be in 5 Years?

National Bank of Canada (TSX:NA) stock still looks like a great deal at these levels.

Read more »