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Is it Finally Time to Buy Enbridge Inc. (TSX:ENB) Stock?

Enbridge (TSX:ENB)(NYSE:ENB) is up nearly 20% in the past month and investors who missed the surge are wondering if they should allocate some funds to buy the out-of-favour energy infrastructure giant.

Let’s take a look at North America’s largest energy infrastructure company to see if it deserves to be on your buy list today.

Turnaround

Management underwent an extensive review process in 2017, launching a strategic overhaul of the company later in the year. Investors remained cautious on the stock in the following months, and Enbridge even hit a multi-year low around $38 per share last spring. However, it soon became evident that the company was making good progress on the aggressive turnaround program, and sentiment has since improved.

Enbridge found buyers for nearly $8 billion of the $10 billion in non-core assets identified through the strategic review. The proceeds are being used to fund ongoing development projects and shore up the balance sheet. In addition, Enbridge successfully acquired the outstanding shares of four of its subsidiaries and brought the businesses under the umbrella of the parent company. This should result in higher retained cash flow, making it easier for analysts to evaluate the big picture.

With a more streamlined business that is focusing on regulated assets, Enbridge should win back investors who bailed on the stock in recent years.

Dividends

Enbridge has a strong track record of dividend growth, which should continue. The board raised the dividend by 10% for 2019 and another 10% increase is slated for next year. Enbridge is working through a $22 billion capital program and shouldn’t need to raise funds to get the projects completed. As the assets go into service, revenue and cash flow increases should support ongoing distribution hikes.

Major pipeline developments are difficult to build these days, but Enbridge has opportunities for smaller projects throughout the asset base. In addition, the company could pursue additional tuck-in acquisitions to drive growth.

At the time of writing, the stock provides a yield of 6%.

Interest rates

Interest rate hikes in Canada and the United States in the past two years had a negative impact on the energy infrastructure segment as investors fled amid fears that rising rates would inflate borrowing costs and potentially put a pinch on cash flow available for payouts. Higher rates also make GICs more competitive with dividend stocks for investor funds.

Sentiment has changed in recent months, and the markets now expect the Bank of Canada and the U.S. Federal Reserve to slow down or pause their rate hike programs. That should bode well for Enbridge and its peers.

Should you buy?

At $48 per share, Enbridge still appears oversold, and it wouldn’t be a surprise to see the stock move back toward the 2015 high near $65 over the next couple of years. In the meantime, investors who buy today can pick up a great dividend with more distribution increases on the way.

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Fool contributor Andrew Walker owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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