Enbridge (TSX:ENB) is popularly considered to be one of the safest Canadian dividend stocks, as it has a decades-long track record of rewarding its investors with healthy dividends. This is one of the key reasons why dividend investors continue to stick with it, even in tough economic times. However, its share prices haven’t seen much appreciation in the last decade, despite its improving financial growth trends and fundamental outlook. Notably, ENB stock has risen only about 6% in the last 10 years to currently trade at $45.05 per share compared to a 52% gain in the TSX Composite Index.
Does that make Enbridge stock look highly undervalued? Before we discuss that to find out where its share prices could be 10 years from now, let’s take a closer look at its business growth outlook and financial growth prospects.
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The ongoing growth trends in Enbridge’s financials
Contrary to its dismal stock price movement in recent years, the long-term growth trends in Enbridge’s financials look impressive. To give you an idea, in five years between 2017 and 2022, the Calgary-headquartered energy transportation company registered a 20% increase in its total revenue to $53.3 billion. More importantly, its adjusted annual earnings jumped by 43% to $2.81 per share during the same five-year period.
Similarly, Enbridge’s profit margins have also significantly expanded in the last 10 years. For example, it reported an adjusted net profit margin of 10.7% in 2022, which was way higher than its adjusted profit margin of 4.9% in 2012.
Even as macroeconomic challenges have taken a big toll on the financial growth of most energy companies globally, Enbridge is continuing to post positive earnings growth. In the first half of 2023, its adjusted earnings rose 1.3% YoY (year over year) to $1.53 per share, despite a 20.5% YoY decline in its total revenue to $22.5 billion. This positive earnings growth clearly reflected the company’s ability to continue growing even in adverse market conditions.
Where will ENB stock be in 10 years?
While it’s nearly impossible for anyone to precisely predict where exactly ENB’s stock price will be 10 years from now, its strong financial growth trends, improving growth outlook, and focus on revenue optimization and diversification make it look highly undervalued right now.
Besides strength in its well-established traditional energy transportation and pipeline business, Enbridge is striving to expand its presence in renewable energy and oil export segments lately. Nearly two years ago, in September 2021, it acquired one of North America’s top crude oil export facilities, Moda Midstream Operating. Similarly, last month, Enbridge announced a strategic acquisition of three large natural gas utilities located in the United States in a deal worth around US$14 billion.
After increasing its focus on renewable energy nearly two decades ago, Enbridge has so far committed to investing over $8 billion in renewable energy and power transmission projects. As the demand for clean energy grows, you can expect its investments to pay off well in the long run.
Despite all these positive factors, Enbridge stock hasn’t seen much appreciation in the last decade. That’s why it seems to have huge upside potential from current levels, and I wouldn’t be surprised even if its share prices double in the next 10 years.
In addition, its impressive 7.9% annualized dividend yield makes EBN stock even more attractive for income investors on the TSX today.
