I Own Enbridge for the Yield, Not the Growth Story. Here's Why This Quarter Didn't Change My Mind.

Shares of Enbridge (NYSE: ENB) are down about 7% over the past month, after the midstream company reported disappointing second-quarter earnings. While there were some causes for alarm in the report, most notably its debt level, the Canadian utility infrastructure company remains a favorite among income investors.

Enbridge has more than 18,000 miles of crude pipeline and more than 19,373 miles of natural gas pipelines. It transports roughly 30% of the crude oil produced in North America and delivers nearly 20% of the natural gas consumed in the U.S. It is also involved in renewable energy, with solar and wind power operations.

I've owned the stock for more than two years, and it has delivered a total return of more than 67% in that time. I'm not jumping ship any time soon. Here are three reasons why I'm holding onto this utility stock.

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It's all about the dividend

At its current share price, Enbridge's dividend yield stands at around 5.47%, more than five times the average S&P 500 dividend. The company raised its quarterly dividend by 3% this year to $0.97 per share, marking the 31st consecutive year of dividend increases.

Enbridge is the largest natural gas utility by volume in North America. As a result, 98% of its cash flow is bolstered by long-term, rate-regulated contracts with built-in inflation adjustments. The company has said it intends to maintain a distributable cash flow (DCF) payout range of 60% to 70% to keep the dividend safe.

Not all of the quarterly report was bad news

The company reported second-quarter adjusted earnings per share (EPS) of CA$0.63, down 3% year over year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were up only 2% over the same period last year, to CA$4.77 billion. Thanks to expenditures for new projects, the company's debt-to-EBITDA level is around 6.328, the highest it has been in three years.

While that level of debt could weigh on earnings for a while, it's important to recognize that the additional spending will pay off, and Enbridge's new energy infrastructure projects should lead to long-term revenue growth.

The good news is Enbridge continues to grow its DCF -- it rose 35.2% year over year to CA$2.9 billion in the second quarter. That means the company's dividend is well covered, giving investors reason to breathe easy as they wait for the new projects to start paying off.

The company also predicts that its yearly DCF will increase to CA$5.70-CA$6.10, up 3.5% at the midpoint, and that yearly adjusted EBITDA will be between CA$20.2 billion and CA$20.8 billion, up 4% at the midpoint.

Industry tailwinds should benefit the stock

The company is focusing on expanding its business. That includes its 2023 purchase of natural gas utilities from Dominion Energy (NYSE: D) and its ongoing pipeline expansions, including the Sunrise Expansion in the Pacific Northwest and the expansion of its 348-mile Vector Pipeline that runs from Eastern Canada to key energy needs in the U.S. Midwest.

On the data center front, Enbridge is actively exploring more than 50 power utility deals to connect natural gas infrastructure to regional power grids and data centers. Enbridge is spending money to make money in the future, and while additional loan payments may wear on its earnings for now, the completed projects should help deliver increased revenue for decades.

James Halley has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.