Enbridge(NYSE: ENB) has been unstoppable over the years. The Canadian pipeline and utility operator has increased its dividend annually for nearly three decades. Fueling that unstoppable growth has been its ability to continue expanding its operations and cash flow by growing its energy infrastructure platforms.
The energy company has secured several new sources of growth this year. It should have plenty of fuel to increase its 6.5%-yielding dividend in the coming years.
Closing the deals
This year has been a transformational one for Enbridge. It has become North America's largest natural gas utility operator by acquiring three gas utilities from Dominion. The company wrapped up the final purchase in the third quarter, closing its $3.2 billion acquisition of Public Service Company of North Carolina. It now distributes 9.3 billion cubic feet of natural gas per day to over 7 million customers in the U.S. and Canada. Gas distribution now supplies 22% of the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), up from 12% before the deals.
Those acquisitions helped fuel an 8% increase in its adjusted EBITDA during the second quarter. Meanwhile, they should help power its growth for the next several years. Enbridge expects its recently acquired gas utilities to grow their rate base at an 8% compound annual rate through 2027. There's more growth potential in the long term, fueled by increasing gas demand to support data centers.
Those needle-moving acquisitions weren't the only ones Enbridge has secured this year. The company also recently closed the $200 million purchase of additional docks and land adjacent to the Enbridge Ingleside Energy Center. The company expects this transaction to unlock future optimization and expansion opportunities at the facility.
Enbridge also acquired a 15% interest in the Delaware Basin Residue pipeline system in West Texas during the third quarter. That deal will extend its Permian strategy and customer service offering. This acquisition further built on an earlier agreement to enhance its Permian gas value chain when it entered into a joint venture for stakes in the Whistler and ADCC pipelines.
Enhancing and extending its backlog
Enbridge's acquisitions alone could help fuel growth for years to come. However, that hasn't stopped it from securing several more organic expansion projects this year, including three new ones over the past few months:
- Canyon System Pipelines: Enbridge approved a $700 million project to deliver oil and natural gas from BP's recently sanctioned Kaskida development in the Gulf of Mexico. This project should enter commercial service in 2029.
- Sequoia Solar: The company approved a $1.1 billion, 815 megawatts (MW) solar energy project in Texas supported by power purchase agreements with AT&T and Toyota. The project will be one of North America's largestsolar energy facilities and should enter service in stages in 2025 and 2026.
- Fox Squirrel Solar: It's participating in the third phase of this solar energy project. The 177 MW expansion should enter service by the end of this year. Amazon is buying 100% of the power produced by this project.
With this trio of new projects, Enbridge has now secured $7 billion Canadian ($5 billion) of new growth projects this year. Meanwhile, it's on track to place CA$5 billion ($3.6 billion) of secured growth capital projects into service by year-end.
The company ended the third quarter with CA$27 billion ($19.4 billion) in secured capital projects under construction, CA$5 billion ($3.6 billion) of which it has already funded. These projects span its four core franchises of liquids pipelines, gas transmission, gas distribution and storage, and renewables, and they have in-service dates through 2029. These projects provide significant visibility into the company's long-term growth prospects.
Enbridge expects to grow its adjusted EBITDA at a 7% to 9% annual rate through 2026, fueled by its recent acquisitions and expansion project backlog. Meanwhile, it anticipates delivering around 5% annual earnings growth beyond 2026. That visible and increasingly secured growth should give it plenty of fuel to continue increasing its dividend.
A well-fueled growth engine
Enbridge has significantly bolstered its growth profile over the past year by securing several acquisitions and expansion projects. These new investments have enhanced and extended its growth outlook, and now the company appears to have plenty of fuel to continue growing its dividend in the coming years. That makes it a great stock to buy for a steadily rising income stream.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matt DiLallo has positions in Amazon and Enbridge. The Motley Fool has positions in and recommends Amazon, BP, and Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.
