Is Enbridge Stock a Buy Now for its 7.6% Dividend Yield?

Enbridge (TSX:ENB) has contrarian investors wondering if it is now oversold.

| More on:
oil and gas pipeline

Image source: Getty Images

The latest leg of the drop in the share price of Enbridge (TSX:ENB) has contrarian investors wondering if ENB stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income or a Registered Retirement Savings Plan (RRSP) targeting total returns.

Enbridge overview

Enbridge is a giant in the North American energy infrastructure sector, with a current market capitalization of about $94 billion. The company is best recognized for its core oil pipeline business, which moves roughly 30% of the oil produced in Canada and the United States. This remains an important part of the company, but Enbridge operates a wide variety of assets that broaden the revenue stream. Enbridge’s natural gas transmission network moves 20% of the natural gas used in the United States. The natural gas utility businesses in Canada deliver fuel to millions of homes and commercial clients.

In recent years, Enbridge has invested in export opportunities to capitalize on the growing global demand for North American energy. Enbridge purchased an oil export terminal in Texas for US$3 billion in 2021. Last year Enbridge took a 30% stake in the new Woodfibre liquified natural gas (LNG) facility being built on the coast of British Columbia. In addition, Enbridge has a growing renewable energy division and is dipping its toes in new segments, including hydrogen and carbon sequestration.

ENB stock trades under $47 per share at the time of writing, recently hitting a new 12-month low. The share price was as high as $59 at one point last year, so there is decent upside potential for contrarian investors.

The pullback appears overdone, considering the business generates steady revenue from essential assets. A recent deal with oil producers will keep the Mainline network full for several more years, and Enbridge’s $17 billion capital program should boost revenue and cash flow as the new assets go into service.

Demand for jet fuel is set to soar as airlines place orders for hundreds of new planes to meet a rebound in travel bookings. Gasoline and diesel fuel consumption will rise as commuters return to offices and trucking companies try to keep up with growing transportation orders to deliver manufacturing and finished goods.

The transition to electric vehicles (EVs) will eventually put a dent in fuel consumption in some advanced economies, but the global outlook for oil demand over the coming years remains robust. The EV uptake will likely take a lot longer to occur, as car buyers wait for the installation of reliable and ubiquitous charging stations.


Enbridge raised its dividend in each of the past 28 years. The days of double-digit annual percentage hikes are probably over, but yearly increases of 3-5% are probably reasonable to expect, supported by the capital program and any strategic acquisitions that occur.

At the time of writing, investors can get a 7.6% dividend yield from Enbridge stock.

Is Enbridge stock a deal?

Ongoing volatility should be expected until the government stops raising interest rates. However, contrarian investors targeting decent long-term total returns might want to start nibbling and look to add to the position on any additional downside. Enbridge should be a good stock to buy today for investors seeking reliable, high-yield passive income.

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.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Enbridge.

More on Investing

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Clean Energy Play: Is Brookfield Renewable a Good Stock for a TFSA?

Add this top renewable energy stock to your self-directed TFSA portfolio for significant long-term and tax-free wealth growth.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

financial freedom sign

2 Stocks With Millionaire-Maker Potential

These two top Canadian stocks are among the best on the TSX, and each has the potential to be millionaire-maker…

Read more »

Piggy bank next to a financial report
Stocks for Beginners

Is It Finally the Right Time to Buy Bank Stocks?

Canadian bank stocks are some of the most secure investments out there, but of them all, this bank stock is…

Read more »

clock time

3 Blue-Chip Stocks Every Canadian Should Own

Want some reliable blue-chip Canadian stocks to buy and hold for the next 10 years? These three stocks are worth…

Read more »