Reviewing Enbridge’s Dividend Safety After Major Project Delay
While major project delays are never good news, execution risk is something all midstream investors need to be comfortable with. Enbridge has been around since 1949 and has established a reputation for bringing projects into service on time and on budget.
However, even the best management teams aren’t perfect. Costly delays on major pipeline projects (or even outright cancellations) are an important risk factor that all shareholders need to be aware of.
Fortunately, it appears as if the Line 3 Replacement Project will be completed eventually. As long as that occurs, then Enbridge’s long-term growth guidance of 10% payout growth in 2020 and 5% to 7% annual DCF per share growth beyond next year should remain intact.
While there is always a chance that the project is ultimately scrapped, the good news is that even this major blow seems unlikely put Enbridge’s dividend at risk. The firm’s payout is secured by a healthy payout ratio, and management is working to strengthen Enbridge’s balance sheet.
Even in a worst-case scenario, it seems likely that Enbridge’s dividend would merely grow slower than expected but wouldn’t be at high risk of a cut.