One of the surest things in investing is an annual dividend increase from Enbridge Inc.
From personal experience, I can tell you that we're not talking about small change here. I bought 50 Enbridge shares for an account I look after back in 2005. I calculate an annualized 10 per cent increase in the amount of dividend income received, never mind what the shares have done. If you're not hip to the benefits of dividend growth, then pay close attention.
If you want to get a sense of a company's dividend history, head to the investor relations area of its website. Enbridge shows a dividend history going back to 1953. There have been a few flat spots in the company's dividend growth record – from 1966 through 1969, from 1974 through 1977 and from 1986 through 1995. Since then, the company's dividend has grown from 25 cents per share on an annual basis to an estimated $1.40 for 2014 (on a split-adjusted basis).
The 50 shares I bought produced dividends of $14.37 at first on a quarterly basis. In the most recent quarter, at total of $35 in dividends was paid. If the dividend had merely kept up with inflation, it would have risen only to $16.87 over the same timeframe.
There's a strong correlation between consistent dividend growth and long-term share appreciation. In this case, the 50 shares of Enbridge bought at a split-adjusted $17.34 have turned into 100 shares at $50, also split-adjusted. Add this 12.5 per cent annualized rate of return to the 10 per cent dividend growth and you end up with a total return of 22.5 per cent.
Some investors might worry about the prospects for Enbridge's share price looking ahead. I figure the share price will take care of itself if the record of dividend growth continues. On this front, Enbridge looks to be in good shape. Using the Dividends view on one of my Globeinvestor.com watchlists, I found that Enbridge's five-year dividend growth rate is 11.2 per cent. That's just ahead of the longer-term growth rate since 2005, and it suggests more good years ahead for Enbridge shareholders.