Enbridge (NYSE:ENB) recently put the wraps on 2019 by reporting its fourth-quarter and full-year results. The Canadian energy infrastructure giant posted solid numbers in both periods, including achieving the top end of its distributable cash flow guidance range. Because of that performance and the company’s strategic progress throughout the year, Enbridge’s 5.8%-yielding payout is on an excellent foundation.
Last year was the final one in the company’s most recent three-year plan following its merger with Spectra Energy in 2017. During that time, the company completed a large slate of expansion projects while strengthening its balance sheet with asset sales and simplifying its corporate structure by acquiring all its publicly traded affiliates. While those two strategic initiatives acted as headwinds on EBITDA and DCF per share growth last year, Enbridge more than offset those issues thanks to the uplift from recently completed expansion projects.
Enbridge placed $9 billion Canadian worth (or US$6.8 billion) of new assets into service last year, CA$7 billion ($5.3 billion) of which started up during the fourth quarter. Those projects include the Gray Oak oil pipeline in the U.S., the Hohe See offshore wind project in Germany, and the Canadian segment of its major Line 3 Replacement. The new additions enabled the company to deliver DCF per share toward the top end of its CA$4.30 to CA$4.60 ($3.25-$3.47) guidance range. As a result, Enbridge generated enough cash to cover its high-yielding dividend by a comfortable 1.54 times, implying a 65% payout ratio, which is a healthy level for a pipeline company. Because of that, the company plans to increase its dividend by 9.8% for 2020, which marks its 25th consecutive year of boosting its payout.
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