Why I Continue Scooping Up Shares of This 7.6%-Yielding Dividend Stock

I just purchased some additional stocks of Enbridge (ENB -0.62%). The primary attraction is the considerable dividend offered by this Canadian energy infrastructure powerhouse. Enbridge presently boasts a dividend yield of 7.6%.

I just can't seem to resist purchasing Enbridge shares lately.

A Highly Sustainable Reward

Enbridge offers a dividend with little risk involved and a high potential for profit. The company, which focuses on pipelines and utility services, consistently generates a steady stream of cash flow. The majority of its income is supported by agreements that determine the cost of its services or long-term contracts, which greatly reduces its vulnerability to fluctuating commodity prices. Additionally, a significant portion of its profits, around 95%, is derived from customers who have a credit rating considered to be of good quality. This increases the likelihood that Enbridge will receive payment for its services.

Moreover, an increasing fraction of its monetary inflow originates from greener energy alternatives such as natural gas and renewable sources. This advantageous financial framework enables Enbridge to thrive in the evolving energy landscape. The company's economically secure nature ensures a consistent cash flow, which has demonstrated resilience against the unpredictable fluctuations of international energy markets.

Enbridge distributes a fair share of its consistent cash income through dividend payments. The business aims to maintain a payout ratio ranging from 60% to 70% of its available cash flow. This strategy provides a comfortable margin for the company, enabling it to hold approximately 4 billion Canadian dollars ($2.9 billion) annually for financing fresh ventures.

The organization additionally possesses a reliable balance sheet with investment-grade status, supported by a reasonable leverage ratio ranging from 4.5 to 5.0. This grants them approximately CA$2 billion ($1.5 billion) each year to take on debt while staying within their desired range, to finance fresh ventures.

Enbridge's blend of consistent cash flow, an attractive dividend distribution ratio, and a comparatively modest level of debt establish a secure base for its substantial dividend.

Unleash Your Potential To Grow

Enbridge not only offers a reliable and consistent source of income similar to bonds but also presents promising opportunities for expansion. This, in turn, allows for potential dividend growth and the possibility of an increase in the company's stock value.

The company anticipates a yearly growth in its profits of approximately 5% in the foreseeable future. This projection is influenced by three key factors:

Enbridge's upcoming investments will mainly focus on backing energy sources that have reduced carbon emissions. The company's confirmed project lineup includes numerous wind farms located in Europe's offshore regions, expansions of natural gas utility services, ventures in renewable natural gas (RNG), as well as initiatives in building natural gas pipelines and enhancing export capacity. Additionally, Enbridge's ongoing development scheme includes similar projects along with fresh prospects in the energy field, such as carbon capture and storage, the production and exportation of blue ammonium, and the exploration of blue and green hydrogen.

The company's expanding profits ought to uphold an increasing dividend. Enbridge has elevated its distribution without fail for 28 years in a row and has the potential to boost it by approximately 5% each year in the foreseeable future. Simultaneously, its emphasis on sustainable energy sources should provide the necessary momentum to sustain continuous growth in its distribution for many more years.

Invest With Confidence

Enbridge possesses a business model with minimal risk. The company is not heavily affected by changes in commodity prices, which allows it to consistently generate steady cash flow. Additionally, Enbridge maintains a reasonable distribution of dividends and leverage ratios, granting it ample financial adaptability to finance fresh ventures, primarily focused on promoting sustainable, low-carbon energy sources.

This should allow Enbridge to continuously increase its profits and generous dividend. This strong combination could provide Enbridge with the energy to achieve significant annual overall returns. The strong possibility of earning a desirable passive income and potential for the value of the shares to rise is why I am still enthusiastically purchasing Enbridge shares at present.

Matthew DiLallo holds stocks in Enbridge. The Motley Fool possesses and endorses stocks in Enbridge. The Motley Fool implements a policy for disclosing such information.