This nearly 7% yielding energy stock expects crude oil demand to remain robust until at least 2050

Enbridge (ENB 0.10%) is a global leader in the transportation of crude oil. It operates the longest and most complex oil and liquids transportation system in North America. The company moves 30% of all oil produced on the continent.

Canadian PIPE and utility The company strongly believes that its crude transportation assets will remain vital to fuel the economy for decades. Demand for oil is expected to continue to grow through 2050. This bodes well for its ability to continue to grow its dividend yield of nearly 7%, which it has done for 29 consecutive years.

A very optimistic view of the cruel

Enbridge CEO Greg Ebel expects global crude oil demand to be “well north” of 100 million barrels per day (BPD) by 2050, according to his comments in a recent interview with Bloomberg, considering that it could be over 110 million BPD by then. That’s well above the International Energy Agency’s forecast, which sees oil demand falling to 97 million BPD in 2050. Ebel believes a growing global economy will fuel higher oil demand, especially in developing countries .

This forecast bodes well for Enbridge’s oil business. The company generates fee-based cash flow as volumes of crude oil flow through its pipelines, sit in its storage terminals and flow through its export facilities. The company expects to derive about half of its annual earnings from its liquids pipeline business in near term. While this is down from 57% last year due to THE the purchase of three natural gas utilities FROM Dominionit is a significant contributor to revenue and cash flow.

If Enbridge’s forecast is correct, it can count on fairly steady volumes flowing through it liquid pipes assets for many years to come. That should allow the company keep generating a lot of cash flow from this business. Meanwhile, if crude volumes continue to rise as Enbridge expects, it should be able to secure more opportunities to invest in its liquids expansion PIPES platform. Currently, the company is investing only $300 million in three projects. It is expanding its Gray Oak pipeline by 120,000 BPD, adding an additional 2 million barrels of storage at the Enbridge Ingleside Energy Center and building the Enbridge Houston oil terminal.

The company expects to capture more crude oil-related expansion projects in the future. For example, it is looking to add up to 150,000 BPD of capacity to its main Canadian oil pipeline system in the coming years. He is also bullish on exports. Ebel told Bloomberg: “The future of oil in North America is over it and from her. You see that in terms of export.” It is evaluating opportunities to expand its export capacity, which could lead to further earnings growth in its liquids pipeline business.

Plan to be wrong

While Enbridge is very bullish on crude oil demand, the company isn’t betting everything on that view. He steadily reduced his dependence on it liquid pipes business over the years by increasing its diversification. He expanded his gas transportation business in 2017 by acquiring US gas pipeline giant Spectra Energy for $28 billion. It has also invested heavily in building and buying other gas infrastructure assets. That business now provides a quarter of its earnings. This number should continue to grow, led by a bunch of expansion projects, including new gas pipelines, an investment in the liquefied natural gas (LNG) export terminal and other related projects.

Meanwhile, it is closing its purchases of gas utilities in phases this year. Its Dominion deals will increase the company’s stable gas distribution revenue from 12% to 22% of its revenue. That number should continue to grow as Enbridge invests billions to expand its gas distribution and storage platform in the coming years.

Finally, Enbridge has a small (3% of earnings) but growing renewable energy business. The company has developed onshore renewable energy projects in North America and has a large-scale offshore wind business in Europe. It has several projects under construction to continue to grow its renewable cash flows. It also has many other low-carbon projects under development, including carbon capture and storageblue and green ammonia hydrogen.

Enbridge’s investments in these low-carbon energy businesses position it to continue to grow its cash flow for decades. These will help reduce the company’s reliance on its liquids pipeline business, thus potentially reducing demand for oil. won’t they have much impact on its cash flow and ability to pay dividends.

Plenty of fuel to pay dividends

Enbridge believes oil demand will remain robust over the next several decades. Because of that, it is LIQUID The pipeline business should continue to generate plenty of cash to pay dividends. It will also give him money to invest in developing his low-carbon businesses. This strategy should allow Enbridge to continue to increase its high-yield payouts in the coming years, reaching a great one income stock yours in the long term.