Enbridge (ENB) is a Canadian pipeline company with an extensive pipeline network in the US and Canada. Enbridge is Canada's largest transporter of crude oil with more than 15,000 miles of crude pipelines capable of delivering 2.2 million barrels of liquids per day. Enbridge posted decent Q3 results at the beginning of November: Adjusted earnings increased to $278 million in Q3 2013 compared to $267 million in Q3 2012 (a plus of 4%). EPS for the first nine months of 2013 came in at $1.33 vs. $1.19 for the same period in 2012 (an increase of 12%). Enbridge has articulated its intention to achieve an annual EPS growth rate of 12% until 2017. Should Enbridge be able to deliver such growth rates, which I think it can considering its investments in additional pipeline capacity, the shares could trade substantially higher and back increased distributions.

Pipeline investments

Enbridge has a strong position in Canadian oil sands and makes continued progress in adding oil sands projects to its pipeline system. Enbridge's Wood Buffalo Extension project in Alberta adds 280 miles (a capacity 490/570 kbpd) to its existing network. Its Norlite Diluent Pipeline in Alberta comprises of 304 miles of additional pipeline and 270/400 kbpd. Both pipelines are expected to come online in 2017 and require investments of about $3 billion.

In addition to vast expansion projects in Canada, Enbridge deploys significant amounts of capital to the US in order to expand its pipeline network. I have argued before that significant infrastructure investments in transportation capacity are needed in order to accommodate the production boom in the North American oil sands and shale areas. Pipeline companies, particularly those that derive a majority of their earnings from liquids, are very likely to profit from their massive capacity investments in the coming years as the production boom continues.

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Dividend history and growth

One of the most relevant factors for deciding on an investment is a company's earnings and distribution record. Even though past performance is no indicator of future performance, a consistent record does create confidence that management has the competence to deliver value in the future. Enbridge's EPS has grown by an average of 10% annually since 2004 and its dividend by an annual average of 13%.

Both achievements (EPS and DPS historical growth) make it likely that Enbridge can reach its earnings and distribution goals it has set until 2017. Enbridge intends to increase annual EPS and distributions by 10-12% annually. Investors purchasing Enbridge today get to enjoy a 3% dividend yield. Should Enbridge be able to increase its annual dividend by 10% annually, the yearly distribution would stand at $1.84 per share in 2017. Investors purchasing today would therefore increase their distribution yield from 3% to 4.4%. If Enbridge increases its annual distributions by 12%, the yield would rise to 4.7%.

Share performance

Enbridge has returned 26% to shareholders over the last two years in terms of share performance. Kinder Morgan Energy Partners (KMP) gained 8%, Plains All American Pipeline (PAA) 63% and Magellan Midstream Partners (MMP) 94%.

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Conclusion

Investors seeking exposure to a North American pipeline company with a focus on liquids could consider Enbridge. The company is a valid long-term alternative to sector darlings Kinder Morgan Energy Partners or Plains All American Pipeline which have their operations in the US. Enbridge's extensive pipeline investments in Canada and the US should prove profitable when the oil and natural gas bonanza in North America continues. North American energy self-sufficiency will increase the interconnectedness of the Canadian and US energy markets. Substantial investments in transportation and storage infrastructure will be required in order to benefit from new export opportunities.

Enbridge has a great platform to capitalize on these long-term trends and its attractive historical earnings and dividend record make this company a long-term BUY.