Earlier today, Enbridge (TSE:ENB)(NYSE:ENB) announced a dividend increase and stated its guidance for 2022 and 2023. The company will be increasing its annualized dividend from C$3.44 per share to C$3.55 per share starting March 1, 2023 – its 28th consecutive annual dividend increase. This gives the stock a 6.4% forward dividend yield. Additionally, Enbridge reiterated its guidance for the remainder of this year, expecting its adjusted EBITDA to come in at the higher end of the $15 billion to $15.6 billion range. Also, ENB expects its distributable cash flow (DCF) per share to be slightly higher than the middle of the C$5.20 to C$5.50 range.
This is enough to cover the C$3.55 per share dividend. However, the dividend isn’t covered if you look at the company’s free cash flow, which we discussed in a previous article. That’s not to say that Enbridge’s dividend is in trouble, but it’s using debt to pay dividends, slowing down its dividend-growth potential.
Enbridge’s 2023 Outlook Implies Modest Growth
For Fiscal 2023, Enbridge forecasts EBITDA in the C$15.9 billion to C$16.5 billion range (about 5.9% growth at the midpoint from 2022 forecasts) and a DCF of C$5.25 to C$5.65 per share. About C$9 billion of its EBITDA is expected to come from its Liquids Pipelines segment.
Also, its debt-to-EBITDA ratio is forecast to come in at the lower end of the 4.5x to 5.0x range, and the company expects to spend C$6 billion in capital investments.
Finally, ENB plans on renewing its buyback program by the end of the year, allowing it to buy back C$1.5 billion worth of shares (about 1.3% of its market cap).
Is ENB Stock a Buy, According to Analysts?
Turning to Wall Street, ENB stock comes in as a Moderate Buy based on five Buys and five Holds assigned in the past three months. The average Enbridge price target of C$59.32 implies 7.3% upside potential.