Invest in Enbridge: High-Yield Dividend Stock Promises Stability

Investors looking for stable passive income may find a promising opportunity in Enbridge (TSX:ENB), a leading energy transportation and distribution company. Currently offering a dividend yield exceeding 6%, Enbridge has demonstrated a consistent ability to maintain and grow its dividends over the decades, positioning itself as a reliable choice for long-term investors.

Enbridge’s Strong Dividend Track Record

For over 70 years, Enbridge has provided investors with a dependable income stream. In December 2024, the company announced a 3% increase in its dividend, raising the quarterly payout to $0.9425 per share. This adjustment elevates the annual dividend to $3.77 per share for 2025. This latest hike adds to an impressive history of dividend growth, which has averaged a compound growth rate (CAGR) of 9% over the past thirty years. Such growth reflects Enbridge’s resilient business model, which generates predictable cash flows through its extensive energy infrastructure.

Enbridge’s income reliability is bolstered by long-term contracts, power purchase agreements, and regulated cost-of-service frameworks. These arrangements enable the company to maintain steady earnings even during periods of market volatility, making its dividend payments particularly dependable.

Future Growth and Financial Stability

Enbridge’s commitment to a sustainable dividend payout ratio of between 60% and 70% of its distributable cash flow (DCF) ensures that it returns a significant portion of earnings to investors while retaining sufficient capital for future growth. This careful approach allows the company to balance shareholder returns with reinvestment opportunities.

Looking ahead, Enbridge is well-positioned to continue its dividend increases. The company boasts a diverse portfolio of over 200 asset streams, recently enhanced by the acquisition of three top-tier U.S. gas utilities. This breadth generates consistent cash flows supported by a low-risk commercial structure, which is crucial for maintaining stability in DCF.

Importantly, over 98% of Enbridge’s income is safeguarded by regulated frameworks or long-term take-or-pay contracts, insulating the company from fluctuations in commodity prices. Additionally, more than 80% of its earnings have built-in inflation protection through indexed contracts or regulatory mechanisms, further solidifying its financial stability.

Despite global economic uncertainties, Enbridge’s strategically located infrastructure is anticipated to remain in high demand. The company does not expect tariffs to significantly affect its financial outlook, as its operations are situated within key demand-driven markets. With a growing presence in gas transmission, Enbridge is poised to benefit from increasing demand stemming from liquefied natural gas (LNG) facilities and transitions from coal to gas.

Enbridge is also enhancing its leverage profile, targeting a debt-to-earnings before interest, taxes, depreciation, and amortization ratio in the healthy range of 4.5 to 5 times. The company projects mid-single-digit growth in both earnings and DCF per share, providing a solid foundation for continued dividend increases. This positioning makes Enbridge a compelling investment for those seeking reliable income streams.

As investors consider their options, it is essential to evaluate the broader market context. While Enbridge presents a strong case, it is worth noting that it did not feature among the top stocks identified by The Motley Fool Stock Advisor Canada team for 2025. The potential for significant returns exists in other companies that are also under consideration.

In summary, Enbridge stands out as a high-yield dividend stock that offers both stability and growth potential for investors. With a strong financial foundation and a commitment to returning capital to shareholders, Enbridge remains a noteworthy option for those aiming to secure long-term passive income.