The Canadian stock market is largely dominated by energy stocks. Energy stocks closely mirror oil prices. Oil prices have hiked over 80% since 2020. This surge is fueled by demand recovery followed by the opening up of the economy after Covid-19. Production reduction by OPEC+ and supply constraints owing to the Russia-Ukraine conflict have aided the same. Enbridge (TSX:ENB) is among the leading Canadian energy infrastructure stocks many consider for its dividend, which has hovered around 8% for some time.
However, the question remains whether this dividend is both stable and likely to grow over time. At this level, many in the market appear to be discounting the ability of Enbridge to produce enough cash flow to pay its distribution in the long term.
Let’s dive into what the numbers say and whether Enbridge is still a buy here.
Image source: Getty Images
Results miss analyst expectations
Enbridge has recently announced its third-quarter results on Friday, November 3, 2023. The oil and gas company has reported its third quarter (Q3) adjusted earnings per share of $0.62, topping the analysts’ estimate of $0.60. As per LSEG, the company has benefitted largely from transporting oil and other liquids in large volumes.
Contrarily, the company’s sales for the quarter missed estimates of $11.33 billion and fell to $9.84 billion. This is quite a fall from $11.57 in the same period a year ago and has led to some concern about the company’s trajectory moving forward.
Personally, I view Enbridge’s bottom-line results as more pertinent for dividend investors, but this will certainly be something investors need to keep an eye on moving forward.
Enbridge recently announced quarterly dividends
Enbridge has recently announced its quarterly dividends worth $0.8875 per common share on November 1, payable on December 1. The dividend remains consistent with the same of September 2023.
Enbridge transports about 20% of natural gas utilized in the U.S. and 30% of the crude oil produced in North America. Based on the number of consumers, the company operates the third-largest natural gas utility in North America.
The company has been strategically clever and is connected to key demand-pull markets and low-cost supply basins. Among its excellent moves, one of the recent additions would be its three gas utilities acquisition from Dominion Energy worth $19 billion. This acquisition will lead to the building of the largest gas utility platform in North America and will deliver 9.3 billion cubic feet per day to seven million customers on a daily basis.
Enbridge has raised its dividends by 10% on a yearly basis for the last 10 years. This is exceptional if you consider its peers.
Adding to its expansion, ENB has acquired seven renewable natural gas facilities in Arkansas and Texas from Morrow Renewables worth US$1.2 billion. Also, it has reported a profit worth $500 million for the recent quarter.
Bottom line
Enbridge has been quite exceptional in terms of dividend payments and has been expanding its business strategically, becoming the largest gas utility platform in North America. Hence, investors who want to invest in this sector and are looking for a steady income flow can consider ENB stock at current levels, in my view.
