Enbridge (NYSE: ENB) stands out as an ideal option for dividend investors. With a dividend yield of 6.5%, it offers the potential for a stable income stream that can cover daily expenses for years. Alternatively, investors can choose to reinvest dividends, enhancing their investment over time before tapping into their income.

However, the company has more to offer than just its attractive dividend.

Enbridge’s Role in the North American Energy Sector

As a major player in the midstream segment of the energy sector, Enbridge operates one of North America’s largest networks of pipelines, storage, and transportation infrastructure. This model revolves around charging fees for usage, making the company’s revenue somewhat insulated from fluctuating oil and natural gas prices. Instead, the key performance indicator is the volume of energy transported through its systems. Despite price dips, energy demand remains robust, which bodes well for Enbridge’s operations.

Image source: Getty Images.

Enbridge’s robust dividend has been supported by its core operations for 29 consecutive years, increasing annually. Understanding the dynamics of its pipeline business is crucial for anyone considering investment. Yet, an important shift has recently occurred in its operations.

Currently, oil pipelines account for approximately 50% of earnings before interest, taxes, depreciation, and amortization (EBITDA), while natural gas pipelines contribute around 25%. Combined, these segments make up 75% of total EBITDA. This indicates that the core midstream operations are vital, but there’s a noteworthy 25% of EBITDA tied to another area.

Strategic Changes Position Enbridge for the Future

Just a year ago, the breakdown of EBITDA was different, with oil pipelines at about 57% and natural gas pipelines making up 28%. This evolution is largely due to Enbridge’s acquisition of three regulated natural gas utilities from Dominion Energy, which increased its regulated natural gas share from 12% to 22% of total EBITDA.

Operating regulated utilities generates stable cash flows similar to pipeline revenue. This acquisition ensures Enbridge’s commitment to maintaining and potentially growing its dividend. More significantly, this change aligns with the company’s aim to adapt to a shifting global energy landscape. Natural gas is seen as an essential bridge as the world transitions away from coal and oil toward renewable energy sources.

Additionally, renewable energy, such as offshore wind and solar, currently contributes around 3% to EBITDA. While this number may seem minor, it represents Enbridge’s forward-looking strategy, leading to sustainable growth.

Enbridge’s Adaptability Makes It an Attractive Investment

Enbridge operates steadily, avoiding hasty decisions. It continues to adjust its portfolio to meet global energy demands while acknowledging that clean energy remains a growing yet small portion of the overall market. When combined with its reliable dividend, the commitment to evolving alongside the energy transition makes Enbridge a compelling option for long-term investors.

A Second Opportunity for Profitable Investments

Have you ever felt you missed a major investment opportunity? Now is your moment to act.

Our team of experts has identified certain companies as a “Double Down” stock recommendation—those poised for significant growth. If you think you’ve missed out, now is the time to invest. Here are some impressive returns from past recommendations:

• Amazon: A $1,000 investment in 2010 would have grown to $20,991!*
• Apple: A $1,000 investment in 2008 would be worth $43,618!*
• Netflix: A $1,000 investment in 2004 would have skyrocketed to $406,922!*

Currently, we are issuing “Double Down” alerts for three incredible companies, and this could be your best chance in a while.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 21, 2024

Reuben Gregg Brewer has positions in Dominion Energy and Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.