Weathering Economic Storms: Two Dividend Dynamos
Over the past few decades, the global economy has faced numerous shocks, from the dot-com crash to the financial crisis and pandemic. Many companies have struggled to stay afloat, let alone maintain their dividend payments. However, some exceptional businesses have demonstrated remarkable resilience, continuing to thrive even in the most challenging times.
Enbridge: A Paragon of Consistency
One such stalwart is Enbridge, a Canadian pipeline and utility operator with a remarkable track record of consistency. For over 69 years, Enbridge has paid dividends to its shareholders, with an impressive 29-year streak of consecutive annual increases. The secret to Enbridge’s dividend durability lies in its extremely predictable earnings profile, with 98% of its EBITDA coming from cost-of-service or contracted assets. This provides unparalleled visibility into its future earnings, allowing the company to achieve its annual financial guidance for an impressive 18 consecutive years.
A Proven Strategy for Success
Enbridge has further enhanced its earnings profile by divesting assets exposed to commodity price volatility and recycling capital into stable assets. For instance, last year’s sale of its stake in Aux Sable helped fund the acquisition of three natural gas utilities this year. With billions of dollars in commercially secured capital projects underway, Enbridge is poised to continue growing its EBITDA by around 5% annually, providing ample fuel for future dividend increases.
Oneok: A Testament to Durability
Another dividend dynamo is Oneok, a pipeline company that has grown its adjusted EBITDA for an impressive 10 straight years, with a compound annual growth rate of 15%. Despite being more exposed to commodity prices than Enbridge, Oneok has overcome obstacles by investing heavily in capacity expansion in areas with rapid production growth. Strategic acquisitions, such as the transformational deal with Magellan Midstream Partners, have further diversified and enhanced its midstream footprint.
A Bright Future Ahead
With several expansion projects due to come online through 2027, Oneok is on track to grow its adjusted EBITDA from $5.2 billion to over $8 billion by 2025. This growth should enable the company to increase its dividend by 3% to 4% annually over the next several years, while also repurchasing shares and strengthening its balance sheet.
Two Dividend Stocks for the Long Haul
Enbridge and Oneok have consistently demonstrated their ability to weather economic storms, growing their earnings and dividends despite periods of severe market dislocation. With visible growth on the horizon, these two dividend dynamos are ideal for investors seeking durable income streams.
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