We've endured quite a number of economic shocks over the past few decades. The dot.com crash, financial crisis, and pandemic have severely affected many companies, forcing several to cut their dividends due to falling profits.
However, some companies have built resilient businesses that can endure even the deepest economic shocks. Enbridge (NYSE: ENB) and Oneok (NYSE: OKE) are two of those stalwarts. They have grown their earnings nearly every year for more than a decade while delivering dividend durability for even longer periods. That makes them great income stocks to buy for those seeking payouts that can deal with difficult times.
Built for durability
Enbridge is a remarkably consistent company. The Canadian pipeline and utility operator has paid dividends for over 69 years and has increased its payment for 29 years in a row.
A big factor in the durability of Enbridge's dividend is its extremely predictable earnings profile. The company currently gets 98% of its earnings before interest, taxes, depreciation, and amortization (EBITDA) from cost-of-service or contracted assets, which provides a lot of visibility into its future earnings.
The company has achieved its annual financial guidance for 18 straight years and is on track to hit it again this year. Its earnings have only declined once during that period, due to the expected impact of collapsing commodity prices and wildfires in Canada.
Enbridge has worked to enhance the durability of its earnings profile by selling assets whose earnings are exposed to commodity price volatility, and then recycling that capital into stable assets. For example, last year it sold its stake in Aux Sable -- which operates natural gas liquids (NGL) extraction and separation facilities -- to help fund the purchase of three stable natural gas utilities this year.
The company is investing heavily in expanding its portfolio of assets with stable earnings profiles. It has billions of dollars in commercially secured capital projects currently under construction that should come on line through the end of the decade.
They support Enbridge's view that it will be able to grow its EBITDA by around the mid-single digits annually. That should give it plenty of fuel to continue increasing its dividend.
Counterbalancing commodity prices with high-octane growth
Oneok has been very durable over the years. The pipeline company has grown its adjusted EBITDA for 10 straight years, increasing it at an impressive 15% compound annual rate despite two major periods of turbulence in the oil market. Meanwhile, it has delivered more than a quarter-century of dividend stability and growth.
What's impressive about this durability is that the company has more exposure to commodity prices than Enbridge does. It operates natural gas and NGL processing plants, which make money based on the value of the products produced. In addition, some of its other assets have some volume risk.
Oneok has overcome these obstacles by investing heavily in expanding its capacity in areas where production is growing fast. The company has also made several highly accretive acquisitions, including Magellan Midstream Partners in a transformational $18.8 billion deal last year to diversify and enhance its midstream footprint. And it acquired Medallion Midstream and a meaningful interest in EnLink Midstream for $5.9 billion this year.
Those deals have Oneok on track to grow its adjusted EBITDA from $5.2 billion last year to over $8 billion in 2025. It also has several more expansion projects due to enter service through 2027.
These growth investments should allow the company to increase its dividend by 3% to 4% annually over the next several years while also repurchasing shares and strengthening its already sound balance sheet.
Two low-risk dividend stocks
Enbridge and Oneok have been models of durability over the decades. Despite several periods of severe market dislocation, they have consistently grown their earnings and dividends. That's a testament to their resilient, low-risk business models and steady expansion.
Both companies have visible growth coming down the pipeline, which should mean continued increases in their payouts. That makes them great dividend stocks to buy for the long term for those seeking durable income.
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Matt DiLallo has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
