Enbridge: A 7.1% Yielding Sleep Well At Night Dividend Aristocrat Dream Stock

seekingalpha08-08

Enbridge offers a 7.1% yield and is a dividend aristocrat with a 29-year growth streak and 5% growth guidance.The company focuses on utility business models, has a low volatility profile, and aims for...

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Dream Stock\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-08 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4711701-enbridge-a-7-1-percent-yielding-sleep-well-at-night-dividend-aristocrat-dream-stock><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Enbridge offers a 7.1% yield and is a dividend aristocrat with a 29-year growth streak and 5% growth guidance.The company focuses on utility business models, has a low volatility profile, and aims for...</p>\n\n<a href=\"https://seekingalpha.com/article/4711701-enbridge-a-7-1-percent-yielding-sleep-well-at-night-dividend-aristocrat-dream-stock\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BFXG1179.USD","symbol_name":"BNY MELLON U.S. EQUITY INCOME \"B\" (USD) 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According to S&P, it has 98th-percentile global risk management and BBB+ to A credit ratings.ENB's growth guidance of 5% could last for decades thanks to tens of trillions of dollars of energy infrastructure demand.ENB's median bear market decline since 1985 is just 7%, 5X smaller than the S&P and 3X lower than a 60/40. Its low volatility, generous yield, and outstanding income dependability (70 years without a dividend cut) make it a potential retirement dream stock and a great intergenerational source of wealth and income.gorodenkoff/iStock via Getty Images What a crazy few days it's been for stocks. Reuters Global stocks crashed with Japan's market, the epicenter of the Yen Carry trade collapse, falling 18% in two days, including the 2nd worst single-day decline in history. Charlie Bilello In the US, the VIX, the volatility index, aka \"the fear index,\" almost quadrupled to 65.4, the 3rd highest level ever recorded. Some US stocks fell as much as 33% during Friday and Monday's sell-offs. The market had its worst day since September 2022, down 3%, with the Nasdaq down 3.4%. Always And Forever A Market Of Stocks, Not A Stock Market YCharts Yet when all was said and done, the market closed 8.4%. YCharts When you zoom out, you see that while individual stocks and ETFs might have seen extreme volatility, the broader market is doing what it's supposed to do: periodic corrections. Daily Shot You can't unwind the biggest carry trade the world has ever seen without breaking a few heads. That is the impression markets give us this morning,\" Kit Juckes, chief foreign exchange strategist at Societe Generale, said in a Monday research note.\" - CNBC. This isn't a concern about the US economy, and it's an internal financial markets issue, specifically a 13% rally in the Japanese Yen, which has been the basis of the $1 trillion Yen carry trade.  Why The Stock Market Just Had Its Worst Day In 2 Years (SA). However, there is rising recession risk, and many investors are understandably nervous since the last two recessions were historical catastrophes. So allow me to share with you why I consider 7.1% yielding Enbridge Inc. (NYSE:ENB), an Ultra Sleep Well At Night quality dividend aristocrat with a recession-resistant utility business model, a wonderful option for scary markets like these. Bottom Line Up Front: Enbridge: A 7.1% Yielding Sleep Well At Night Dividend Aristocrat Perfect For Scary Markets Dividend Kings Zen Research Terminal Investor Presentation Enbridge is the largest energy empire in North America. It's a dividend aristocrat with a 29-year dividend growth streak, 5% growth guidance, and 12.1% total return guidance, similar to the 11% returns it's delivered for 20 years. Investor presentation It now spans two continents, and management has a reasonable and prudent plan and growth market measured in the tens of trillions over the coming decades to continue generating rock-steady, dependable cash flow and dividends. FactSet ENB has the 2nd best growth prospects in midstream, 5.4%, according to analysts, based on management guidance of 5% long-term growth. What makes ENB special is that its 5% growth potential spans decades rather than just a few years. FactSet This isn't just a BBB+ rated dividend aristocrat; it's a dividend aristocrat with a clear plan to become a dividend king and extend the dividend growth streak to over 50 years. Investor presentation Enbridge is the most utility-like midstream at 98% cash flow regulated under a long-term take-or-pay contract. Investor presentation Investor presentation It is the largest gas utility in Canada, and after acquiring three new utilities, it is the largest gas utility in North America. Earnings Presentation Earnings Presentation When ENB completes the acquisition of PSNC, it will have nine million gas utility customers. Based on its renaming strategy, I expect PSNC to become Enbridge Gas North Carolina. And it's not just natural gas; ENB is also investing in electric utilities through its fast-growing green energy segment. Investor PresentationEarnings Presentation Unlike some green energy investments, which can be speculative, ENB's investments are 100% supported by long-term contracts, including European and Canadian utilities and public companies like Amazon.com, Inc. (AMZN) and AT&T Inc. (T).  7 million natural gas utility customers. 5.7 million renewable energy electricity customers. 12.7 million total utility customers.  Earnings Presentation Data centers that house AI models and tools are expected to double their electricity use by 2030 (7% of US electricity). That's why utilities are the lowest-risk \"AI trades,\" ENB is one of the highest-yielding options with the best long-term return potential. The future of ENB is 100% utility, focusing on being an energy utility and not an oil pipeline company. Just like Philip Morris International Inc. (PM) is the leader in the transition to a smoke-free world, Enbridge is the industry leader in the post-oil transition for midstream. That makes it the ultimate \"buy and hold forever\" midstream, which is why the bond market is willing to lend to ENB for 80 years (and 100 years in recent years). A corporate management team runs Enbridge. Like The Bank of New York Mellon Corporation (BK) or The York Water Company (YORW), it has a culture built to survive and thrive for centuries to come. While delivering 12% to 13% over that time. 5-Year Consensus Total Return Potential: 100% = 14% Annually vs. 87% S&P (13% annually) FAST Graphs, FactSet 3-Year Consensus Total Return Potential: 42% = 16% Annually vs. 40% S&P (13% annually) FAST Graphs, FactSet Enbridge offers long-term market-like return potential but with lower volatility and less speculation. While S&P has to deliver 12% long-term growth to achieve these kinds of returns, 2X the historical norms, ENB has a utility-like business model that makes it much easier to determine future growth rates. When you get paid returns primarily in yield from an investment-grade dividend aristocrat, it's less uncertain that ENB can deliver 12% to 13% long-term returns and income growth. And don't forget that sleeping well at night in market downturns is priceless.   Great Volatility Profile For Those Looking To Sleep Well At Night Enbridge isn't just a wonderful source of very low-risk 7.1% yield; it's a remarkably defensive aristocrat.         Metric US Stocks (VOO) 60-40 (BAGPX) ENB   Yield 1.25% 2.55% 7.12%   2022 Bear Market (1/4/22-10/12/22 -27.5% -21.1% -4.30%   Pandemic (2/19/20-3/23/20) -35.3% -21.7% -43.40%   2018 Bear Market (9/21/2018-12/25/2018) -20.2% -11.6% -13.80%   2011 Debt Ceiling Crisis (4/29/2011-10/3/2011) -21.6% -10.8% -3.10%   Great Recession (10/8/2007-3/2/2009) -55.2% -29.9% -23.90%   Tech Crash (3/27/2000 - 10/7/2002) -49.2% -18.6% -5.80%   1990 Bear Market (7/17/1990-10/11/1990) -20.4% -8.7% -1.80%   1987 Black Monday Period 10/13/87-12/4/87 -28.8% -13.4% -22.90%   Average Bear Market -32.8% -17.5% -14.90%   Median Bear Market -27.5% -18.6% -5.80%   S&P Correlation During Crisis 1.00 0.84 0.37   Tech Boom (10/12/1990-3/27/2000) 534.9% 388.9% 643.66%   Lost Decade Total Returns (3/27/2000-12/19/2011) -1.7% 42.3% 233.79%   ZIRP Era Total Returns (12/16/2008-3/16/2022) 524.5% 266.3% 785.13%   Post-Pandemic Total Returns (3/23/2020-6/5/24) 155.2% 67.4% 138.22%   Annual Returns Since Inception/1985 11.3% 8.1% 13.10%   Consensus Growth Rate 11.7% 7.0% 5.4%   Consensus Future Returns 13.0% 9.6% 12.5%   Historical Tax Expense 7.2% 20.8% 15.0%   Post-Tax Consensus Return Potential 12.3% 7.7% 10.4%   Expense Ratio 0.03% 0.03% 0.00%   Net Consensus Return Potential 12.2% 8.4% 10.4%   Negative Correlation-Adjusted Net Return Potential 6.1% 4.6% 7.6%   Click to enlarge (Source: Dividend Kings Portfolio Optimizer Tool) ENB's median bear market decline is 3X less than the 60/40's and 5X smaller than the S&P. That's courtesy of its rock-solid cash flow stability, strong balance sheet, utility business model, and exceptionally long-term focused corporate culture. ENB is run like Canadian banks, focusing on perpetual sustainability and a relentless pursuit of maximizing long-term income for shareholders. A 100-Year Plan For Sustainable Income Growth And 12% To 13% Returns Earnings Presentation ENB's growth plans are well on track. Most importantly, those three utility acquisitions are closing and are now expected to be completed by the end of Q3. ENB will deliver full benefits starting in Q4. The funding to complete the acquisitions has been completed. Enbridge isn't self-funding like its peers; instead, it's harnessing capital markets to achieve maximum sustainable growth. Management's vision is to achieve scale and diversification in a Realty Income Corporation (O) like a strategy to get as big, diversified, and dependable as possible. Earnings Presentation ENB's focus on acquiring and growing its natural gas utility business is brilliant, as the utilities it's buying are growing their rate bases at 8%. Earnings Presentation The long-term plan to maintain 4.75X leverage is prudent, similar to how Realty Income maintains a steady 6X leverage over time. It allows it to grow quickly while maintaining its industry-leading credit rating. ENB has $17 billion in secured growth projects, meaning long-term contracts are locked in. Earnings Presentation ENB is offering a very clear investment opportunity. Management guides for 10% to 12% long-term returns in a low-volatility package with a clear growth outlook for decades. According to management, its green energy capacity is 5.3 GW, which can expand by 12.1 GW by 2030. And that shadow backlog is likely to grow in the future, representing the brilliance of ENB as a high-yield income growth opportunity. Earnings Presentation ENB has a decades-long growth runway and can expand and scale continuously, no matter how large it grows. Earnings Presentation Earnings Presentation ENB now owns 25% of US liquified natural gas export capacity, a significant growth market in the coming years. Earnings Presentation EIA LNG capacity is expected to almost double by 2027 and keep growing steadily for decades. EIA 12.1% total return guidance = 9.8% inflation-adjusted total return guidance (S&P 7% historical). Why Enbridge's 100-Year Growth Outlook Is Potentially Life Changing          Year Inflation-Adjusted Return Guidance $1,000 Invested Grows To Annual Inflation-Adjusted Income (7% Yield) Monthly Inflation-Adjusted Income   5 1.595922143 $1,595.92 $111.71 $9.31   10 2.546967487 $2,546.97 $178.29 $14.86   15 4.064761811 $4,064.76 $284.53 $23.71   20 6.487043382 $6,487.04 $454.09 $37.84   25 10.35281618 $10,352.82 $724.70 $60.39   30 (retirement time frame) 16.52228858 $16,522.29 $1,156.56 $96.38   35 26.36828621 $26,368.29 $1,845.78 $153.82   40 42.08173184 $42,081.73 $2,945.72 $245.48   45 67.15916767 $67,159.17 $4,701.14 $391.76   50 107.1808028 $107,180.80 $7,502.66 $625.22   55 171.0522165 $171,052.22 $11,973.66 $997.80   60 (investing lifetime) 272.98602 $272,986.02 $19,109.02 $1,592.42   65 435.6644342 $435,664.43 $30,496.51 $2,541.38   70 695.2865176 $695,286.52 $48,670.06 $4,055.84   75 1109.623149 $1,109,623.15 $77,673.62 $6,472.80   80 1770.872155 $1,770,872.15 $123,961.05 $10,330.09   85 2826.174085 $2,826,174.08 $197,832.19 $16,486.02   90 4510.353802 $4,510,353.80 $315,724.77 $26,310.40   95 7198.173507 $7,198,173.51 $503,872.15 $41,989.35   100 (Pension/Endowment, Charity Trust Time Frame) 11487.72449 $11,487,724.49 $804,140.71 $67,011.73   Click to enlarge Adjusted for inflation, Enbridge is currently guiding for 9.8% long-term returns, and analysts expect 10.2% annual returns. That might not sound sexy in the age of AI-driven tech gains, but that growth outlook isn't for a few years; it's for decades. $1,000 invested in Enbridge over 30 to 60 years can potentially deliver returns that are truly life-changing. Those returns would be primarily driven by income, as young investors who buy, hold, and DRIP for the next 60 years could earn as much as $1,600 per month in inflation-adjusted income at retirement. Invest $10,000 into ENB at age 20; by age 80, that's a potential $16,000 in monthly inflation-adjusted income. That's the kind of income compounding ENB offers. Risks To Consider: Why Enbridge Isn't Right For Everyone ENB pays qualified dividends and uses a 1099 tax form. There is no K1 tax form. Enbridge is a Canadian company, so US investors in taxable accounts are subject to a 15% dividend tax withholding. There is no dividend tax withholding in non-taxable accounts like 401Ks, IRAs, and Roth IRAs. For US investors, there is a tax credit to recoup the dividend in taxable accounts, avoiding double taxation. However, it requires some paperwork. As for fundamental risks, some investors dislike that ENB is not pursuing a self-funding business model, such as Enterprise Products Partners L.P. (EPD), which runs an FCF self-funding business model. FCF self-funding means zero reliance on equity markets for growth capital and, thus, zero growth association with stock price. Utilities, REITs, and ENB rely on periodic share sales and debt issuances to fund their growth (EPD also uses debt). So theoretically, if ENB's stock price is weak enough for a long time, it can slow the growth rate because it minimizes how much they can issue at the market via their ATM program. The purpose of the stock market is to allow companies to sell shares to raise growth capital. While buybacks are very popular, selling new shares is fine as long as the investment is accretive to cash flow per share and thus supports a safe and growing dividend. Let's Talk About Debt Enbridge has a lot of debt, and some investors worry this is unsustainable. YCharts Let's be clear. Debt on its own is meaningless. What matters is debt vs. cash flows that service debt. Balance Sheet Consensus Forecast         Year Debt/EBITDA Net Debt/EBITDA (5 Or Less Safe According To Credit Rating Agencies) Interest Coverage (2+ Safe)   2023 4.93 4.66 3.18   2024 5.23 5.42 3.01   2025 5.08 5.25 2.62   2026 4.89 5.11 2.73   2027 4.86 NA NA   2028 4.56 NA NA   2029 4.33 NA NA   Annualized Change -2.2% 3.2% -4.9%   Click to enlarge (Source: FactSet) As is its interest coverage ratio, ENB's leverage is expected to remain stable or even fall over time. In other words, if ENB's debt goes up 10X to $600 billion, but the cash flow of its service debt goes up 10X as well, then even though its debt is very high, that debt is still safe. YCharts S&P       S&P LT Risk Management Score Rating   0% to 9% Very Poor   10% to 19% Poor   20% to 29% Suboptimal   30% to 59% Acceptable   60% to 69% Good   70% to 79% Very Good   80+% Exceptional   ENB 73.58%   Global Percentile 98%   Click to enlarge (Source: S&P)  If You Want To Sleep Well At Night In Scary Markets, It's Tough To Go Wrong With This 7.1% Yielding Low Volatility Dividend Aristocrat.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2457399030"}