Enbridge (TSX:ENB) is up 14% from the October low. Investors who missed the rally over the past three months are wondering if ENB stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income or a Registered Retirement Savings Plan (RRSP) portfolio targeting dividends and total returns.
ENB stock price
Enbridge trades near $49 per share at the time of writing compared to less than $43 at the 12-month low. The stock is still way off the $59 mark it reached in 2022, so there is still decent upside potential.
Enbridge expects to generate about 3% growth in distributable cash flow in 2024, driven by revenue contributions from new assets that went into service last year from the capital program and about $3 billion of tuck-in acquisitions. The guidance doesn’t take into consideration the boost to revenue and cash flow that should occur as soon as Enbridge closes its US$14 billion deal to buy three American natural gas utilities.
Enbridge shifted its growth strategy in recent years to focus on exports, renewable energy, and natural gas distribution. The large oil pipelines and natural gas transmission networks remain important drivers of steady revenue and cash flow, but getting big pipeline projects approved and built is very difficult in the current environment. This should make the legacy infrastructure more valuable, and Enbridge is a major force in the energy infrastructure sector. The company moves 30% of the oil produced in Canada and the United States and 20% of the natural gas used by Americans.
The recent investments include an oil export terminal in Texas and a stake in the Woodfibre liquified natural gas (LNG) export facility being built in British Columbia. International buyers are increasingly searching for reliable sources of oil and natural gas.
On the renewables side, Enbridge acquired a U.S. developer of wind and solar projects to bulk up its renewable energy division and grow the assets in the group.
In 2023, Enbridge added about $7 billion in capital projects to bring the backlog to roughly $25 billion. As the new assets are completed and go into service, there should be a boost to cash flow.
Enbridge dividend
Enbridge raised the dividend by 3.1% for 2024. That marks the 29th consecutive year of distribution growth. Investors who buy the stock at the current level can get a 7.4% dividend yield.
Should you buy ENB stock now?
Ongoing volatility should be expected until the central banks begin to cut interest rates, but Enbridge pays an attractive dividend that should continue to grow. If you have some cash to put to work in a TFSA targeting passive income, ENB stock still looks cheap right now and deserves to be on your radar. RRSP investors might also consider taking a position and adding more on a dip. With the yield above 7%, you get paid well to ride out any turbulence.
