This 6.5% yielding stock has paid dividends for nearly 70 years and has plenty of fuel to keep paying them

Enbridge (ENB 0.56%) is one of the most durable dividend stocks in the energy sector. The Canadian pipeline and utilities company has paid dividends to its investors for more than 69 years. He has increased his pay for the last 29 years in a row. That’s impressive given all the volatility in the energy sector over the years.

The energy company has enough fuel to keep paying dividends. With a dividend yield over 6.5% and higher growth in the future, it is a great option for those looking for a very bankable income stream.

Built to be trusted

Enbridge has four main franchises: lLIQUID pipes, representing 50% of its adjusted value EBITDA; gas transportation and midstream, 25%; gas distribution and storage, 22%; and renewable energy, 3%. They supply the company very predictable earnings supported by cost-of-service agreements and long-term contracts, totaling 98% of EBITDA. This predictability has been on full display over the last 18 years. Enbridge has hit its financial guidance every year despite two major recessions and two additional periods of oil market turbulence.

The PIPE and utility the company pays out 60% to 70% of its stable cash flow in dividends every year. That’s a conservative payout ratio for a company with that kind of money stable cash flow. It gives Enbridge ample room for error while allowing the company to retain significant cash flow to fund expansion projects and bolt-on acquisitions.

Enbridge also has a solid financial foundation. Because of its strategy of using long-term, fixed-rate debt and holding onto them leverage ratio low, has an investment grade credit rating. Ended the second quarter with a leverage ratio of 4.7, which was in the middle of its target range of 4.5 to 5.0. It sees the leverage ratio trending toward the lower end of that range next year as it captures all the benefits of recent natural gas utility acquisitions and maintains its current capex range.

These features put Enbridge’s high dividend yield on a very sustainable footing. It generates enough post-dividend cash flow to fund a significant portion of its guaranteed capital program. Meanwhile, it has the balance sheet capacity to fund the rest with spare room. This provides additional flexibility to capitalize on future growth opportunities as they arise.

The fuel to grow

Enbridge ended the second quarter with C$24 billion ($17.8 billion) of guaranteed capital projects in stock. These projects include oil terminal expansion, new gas pipelines, natural gas utility expansion and renewable energy projects. The company expects these projects to enter commercial service by 2028. This gives Enbridge tremendous visibility into its future growth.

These guaranteed capital projects should increase the company’s EBITDA by approximately 3% per year by 2026. Meanwhile, cost savings and optimizations will add another 1% to 2% to the bottom line each year. In addition, Enbridge has significant additional investment capacity that it could deploy to add another 1% more to its annual earnings growth rate. It sees potential to continue growing its earnings by around 5% annually after 2026, given the capital projects it has under construction and in development.

The company’s noticeable earnings growth prompts its view that it should have enough fuel to continue raising its dividend. It could increase the payment by up to 5% annually in the medium term.

Lots of power to keep paying dividends

Enbridge has been one of the most reliable dividend stocks in the energy sector over the decades. This trend should continue in the future. The company has a very low-risk business model and visible growth prospects, so it should have no problem paying dividends going forward, and its payouts will continue to grow over the next few years. That’s what it does a great one stock to buy for those looking for a very sustainable stream of dividend income.