Enbridge Increases Dividend by 3%

Enbridge announced today that it’s increasing its dividend by 3%. With the increase, the company has now raised its payout for 30 straight years.

What’s also promising is that the company announced strong guidance for 2025. Not only does the company say that it’s on track to hit the high end of its guidance for EBITDA this year but it’s also expecting more growth ahead for the next couple of years, expecting distributable cash flow to rise by around 3% per share.

Distributable cash flow, or DCF, is what Enbridge uses to evaluate how safe its dividend is so if that’s increasing, that’s good news for investors because it means there could be more rate increases in the future. That being said, if it’s increasing at a rate of 3%, investors also shouldn’t expect to see much larger rate hikes than that in the coming years.

Historically, Enbridge has been an excellent dividend growth stock. In the past 10 years, its dividend has nearly doubled in value — 97% in 10 years. That averages out to a compounded annual growth rate of around just over 7%. That doesn’t mean you should expect that type of growth in the future, however. Obviously this latest increase is just 3%, which is much smaller than that. And if we assume that Enbridge increases its dividend at a rate of 3% per year, then over 10 years that means its payout may only increase by about 34%.

However, given that Enbridge already pays a high yield of around 6%, it already offers you a really generous payout, so you may not need those big bump ups in the dividend to have an incentive to stay invested. If all they do is offset inflation, that may be enough of a reason to remain invested.

As for the stock itself, year to date, Enbridge is up around 29%. This news isn’t sending the stock soaring just because dividend hikes have been the norm for Enbridge for decades so investors have come to expect them. It would be much bigger news if the company didn’t increase its dividend.

Currently, the stock is trading at around 20 times its trailing earnings so it’s a decently priced stock to own, and it makes for a fairly dependable dividend investment to hang on to, especially if you’re looking for a good stock to put into your tax-free savings account.

Over the past five years, it has risen by just 22% but when you factor in the dividend, its total return is up around 71%, and that’s really the big reason you’ll probably want to own the stock, is for that high payout. By comparison, however, the S&P 500’s returns over the past five years including dividends are up around 110%.

Enbridge, however, can be a bit of a safer play in the long run because its business centers around a lot of long-term contracts and so it makes for a fairly steady investment to hang on to. It’s certainly one of the better stocks on the TSX that you can buy.