Enbridge (ENB 0.47%) has an exceptional history of paying dividends. The Canadian pipeline and utility giant has increased its payout for 28 straight years. Fueling that steady growth is Enbridge’s ability to expand its network of income-producing energy infrastructure assets.
The company remains an excellent option for income-seeking investors. That was clear again this quarter as it produced steady results and continued making progress in securing new sources of earnings growth.
Enbridge generated 2.8 billion Canadian dollars ($2.1 billion) of distributable cash flow during the second quarter, a 1% increase from the prior-year period. That kept the company on track to achieve its full-year guidance, which would see cash flow rise by as much as 4% this year. The company is doing an admirable job navigating a few headwinds this year, including higher interest rates and lower commodity prices.
The company continues to produce plenty of cash to cover its dividend, which currently yields 7.3%. This year, its dividend payout ratio should be between 63% and 68%.
That aligns with its long-term target of keeping its payout ratio between 60% and 70% of its distributable cash flow. That enables Enbridge to retain a significant amount of cash, which it uses to fund expansion projects while maintaining a strong balance sheet.
Enbridge expects its leverage ratio will be in the lower half of its 4.5x-5x target range this year. That provides additional financial flexibility to fund its growth while increasing its dividend.
The fuel to continue growing
While Enbridge is facing some growth headwinds this year, it expects them to fade. Meanwhile, the company continues to secure new opportunities to drive future growth.
It locked up a few more expansion projects during the second quarter. NextDecade made a final investment decision to start constructing its Rio Grande LNG facility in July. Because of that, Enbridge expects to start construction on the Rio Bravo pipeline to support that facility once it receives regulatory approval. It anticipates investing about $1.2 billion into the project, which should come online in 2026.
That project was part of CA$1.8 billion ($1.3 billion) of expansions added to the company’s backlog during the quarter. It also added $200 million to its gas transmission modernization program. These additions increased the company’s secured growth capital backlog to CA$19 billion ($14.2 billion).
It expects to finish CA$3 billion ($2.2 billion) of projects this year and next, with the remaining coming online through 2028. Meanwhile, it has several more expansion projects in the pipeline, including more than 4.5 gigawatts of onshore renewable energy projects under development.
These expansion projects support Enbridge’s outlook that it will grow its distributable cash flow per share by around 3% annually through 2025, and then by roughly 5% annually after that. This rising cash flow should support dividend growth at a similar pace.
The company has ample financial flexibility to fund its continued expansion while growing the dividend. It projects to have about CA$6 billion ($4.5 billion) per year of funding capacity when adding its post-dividend free cash flow to its balance sheet capacity.
In addition to financing organic growth projects, Enbridge can also make opportunistic acquisitions to enhance earnings. It has spent about CA$1.1 billion ($820 million) this year to acquire a couple of natural gas storage assets and an additional interest in an oil pipeline.
Steady as it goes
Enbridge continues to generate very durable cash flow, which has been on full display this year. That’s giving it the money to pay an attractive dividend while investing in its continued expansion.
It has a lengthy pipeline of projects underway and plenty of funding capacity. Because of that, Enbridge should be able to continue increasing its dividend. That makes it an excellent stock for income-seeking investors to buy and hold long term.
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn to double workforce, investment in India by ‘this time next year’
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