Enbridge (TSX:ENB) is one of the most popular dividend-paying stocks from the energy sector in Canada. While this Calgary-headquartered company is not directly involved in oil and gas production, it operates a large network of pipelines that transport crude oil, natural gas, and other liquids across North America. Besides that, Enbridge has increased its focus on renewable energy projects, such as wind, solar, and hydroelectric power generation, in recent years.
Shares of Enbridge have jumped by more than 17% in the last six months to currently trade at $51.67 per share with a market cap of $109.8 billion. But is it still prudent to invest in Enbridge stock at the current level? Let’s take a closer look at some fundamental factors that could drive its future performance and dividend payouts.
Enbridge’s strong earnings and profit margin
In the last few years, volatile commodity prices and other macroeconomic concerns have affected the energy sector. Nonetheless, Enbridge’s long-term earnings growth trends still look impressive. To give you an idea about that, the company’s total revenue in the last five years slipped 6% from $46.4 billion and 2018 to $43.6 billion in 2023. Nonetheless, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) during these five years increased by a solid 28% from $12.8 billion in 2018 to $16.5 billion in 2023. Its adjusted EBITDA margin in these five years also significantly expanded from 27.7% to 37.7%, reflecting its operational efficiency and economies of scale.
On a similar note, Enbridge recently reported a solid start to 2024, with first-quarter adjusted earnings rising 8.2% YoY (year over year) to $0.92 per share. Its adjusted net profit for the quarter surged 13.3% to nearly $2 billion. Its strong net profit figures for the quarter were supported by a 10.9% increase in ENB’s adjusted EBITDA to roughly $5.0 billion, showcasing enhanced throughput gains across its liquid pipeline systems.
To add optimism, Enbridge registered a strong 9% YoY increase in its distributable cash flow in the March 2024 quarter, due largely to higher system utilization driven by robust demand in key markets and operational enhancements.
Is ENB stock still a good investment today?
The answer to the question of whether Enbridge stock is still a good investment today depends on several factors, including your risk appetite and time horizon. If you’re looking to double or triple your money in a short period of time, you might be disappointed, as Enbridge is not a high-growth stock. However, if you’re looking for a steady and reliable source of income with the potential for modest capital appreciation, then Enbridge might be a great fit for your portfolio.
Besides its strong earnings growth trends, the company’s proactive strategic moves brighten its long-term growth outlook. For example, Enbridge recently completed the acquisition of The East Ohio Gas Company, now Enbridge Gas Ohio, from Dominion Energy. This $6.6 billion acquisition is a strategic expansion of Enbridge’s natural gas distribution footprint in the United States.
Moreover, ENB could be a great stock for long-term income investors as it has a nearly three decades-long track record of raising dividends and offers an attractive annualized dividend yield of 7.1% at the current market price.
