Construction to Resume on Trans Mountain: Is Now the Time to Buy Enbridge (TSX:ENB) Stock?

Enbridge Inc (TSX:ENB)(NYSE:ENB) and other oil and gas stocks could see investment dollars return to the industry if the Trans Mountain pipeline is finally able to get going.

| More on:
pipe metal texture inside

Image source: Getty Images

The Trans Mountain pipeline continues to make progress, as this week the National Energy Board approved a request to resume construction at two terminals in Burnaby, B.C.

Although the Edmonton terminal is still waiting for approval, this is a step in the right direction for a pipeline that’s been stalled for a long time. And while it certainly won’t put an end to the opposition of it and protests of the pipeline, it certainly gives it a lot more traction. Last year, construction on the pipeline failed to see any real progress before the Federal Courts stopped the project.

Earlier this year, the Trans Mountain got approval to move forward, but appeals could result in another interruption. The pipeline is a big test for the Canadian oil and gas industry; if it’s able to be completed, it could give investors some much-needed confidence in a sector that’s taken a beating over the years.

One stock that could see a big benefit from this is Enbridge (TSX:ENB)(NYSE:ENB), which has had no shortage of issues relating to pipelines and getting them approved, not only in Canada but south of the border as well.

Positive results by the company have been insufficient to get the stock going, and even though it hit the $50 mark earlier this year, it has failed to stay above that threshold for any sustained period of time. Without more investor confidence in the industry, that’s also not likely to change anytime soon.

A key reason why companies have scaled back capital spending in the industry hasn’t been just to cut costs and improve their financials; it’s because projects have a hard time getting off the ground. And these are costly expenditures; if they end up going nowhere, they could jeopardize a company’s financial stability.

Could a change in government be the solution?

As much as the government wants to balance the needs of environmentalists and indigenous groups, it also needs to be more transparent with oil and gas companies so that expectations can be clear. One of the frustrations for companies moving pipeline projects forward has been with goalposts being moved and new conditions needing to be satisfied.

That’s also why there could be some bullishness that returns to the industry if we see a different government in place after the upcoming federal election, as it could provide much more support to companies like Enbridge and those that are trying to grow and improve the industry.

Ultimately, the demand for oil and gas is not going away anytime soon, and companies are making efforts to be more environmentally safe. However, without support from the government, it’s going to be a tough sell to investors that the industry is a good investment today.

Bottom line

Despite the uncertainty, Enbridge stock could be an appealing buy. Not only does its low share price offer investors a better-than-normal yield, but it also provides more potential upside for the stock as well. Should the day come when all the hurdles for the Trans Mountain are cleared, it could be the tipping point that sends Enbridge and other oil and gas stocks soaring.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

thinking
Dividend Stocks

Should You Buy BCE Stock for its 8.6% Dividend Yield?

Down over 20% from all-time highs, BCE stock offers you a tasty dividend yield in 2024. But is the TSX…

Read more »

grow dividends
Dividend Stocks

How Long Would It Take to Turn $20,000 Into $100,000 With TSX Dividend Stocks?

Here's how high-quality TSX dividend stocks and the power of compound interest can help grow your investments by 400% or…

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

2 Soaring Stocks I’d Buy Now With No Hesitation

These two stocks may be the most expensive on the market, but they're high for a reason! And I'm still…

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

Invest $374.50 Each Month to Create Passive Income of $288 in 2024

Investing a specific amount each month to create passive income this year is possible with monthly dividend payers.

Read more »

Happy retirement
Dividend Stocks

2 Stocks to Help Turn $100,000 Into $1 Million

If you want to reach $1 million, $100,000 can certainly get you there. Even if you invest in some low…

Read more »

warning or alert
Dividend Stocks

Income Alert: These Stocks Just Raised Their Dividends

There's no shortage of companies that raised their dividends recently. Here's a trio of options to consider buying now.

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

Don’t Look Now, But These 3 TSX Stocks Look Poised for a Nice Rally 

Three TSX stocks are in a downtrend amid headwinds. 2024 may be rocky for them, but they are poised for…

Read more »

protect, safe, trust
Dividend Stocks

3 Safe Dividend Stocks to Beat Inflation

These three dividend stocks are excellent buys to beat inflation, given their solid underlying businesses and high yields.

Read more »