Enbridge (TSX:ENB) is up about 10% in the past month. Investors who missed the recent bounce are wondering if ENB stock is still undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio targeting high-yield dividends for passive income or total returns.
Enbridge share price
Enbridge trades near $50 per share at the time of writing compared to $45.50 in the middle of April. The stock was as low as $43 at one point last fall.
The bounce off the 12-month nadir could continue through the end of 2024 if interest rates start to fall and it wouldn’t be a surprise to see ENB stock take a run at the 2022 high around $59 in the next couple of years.
Growth
Enbridge has done a good job of pivoting from the construction of massive oil pipelines to other segments with good growth potential. The company bought an oil export terminal in Texas to capitalize on international demand for North American oil. In addition, Enbridge took a 30% stake in the Woodfibre liquified natural gas (LNG) facility being built on the coast of British Columbia. It is expected to be finished by 2027.
Enbridge has also beefed up its renewable energy group. The company is a partner in offshore wind projects in Europe and increased its American presence in 2022 through the acquisition of a wind and solar project developer in the United States.
Finally, Enbridge is in the process of wrapping up its US$14 billion acquisition of three U.S. natural gas utilities. The purchases will make Enbridge the largest natural gas utility operator in North America. These assets, when combined with the extensive natural gas transmission network that moves 20% of the natural gas in the United States, will position Enbridge to capitalize on the anticipated growth in demand for natural gas as a fuel source to produce electricity for artificial intelligence data centres.
Down the road, Enbridge is also set up to benefit from the transition to hydrogen fuel that will be delivered through natural gas infrastructure.
Dividends
Enbridge is working on a $25 billion capital program along with the acquisitions to drive revenue and cash flow higher in the coming years. Management expects distributable cash flow to expand by 3% annually through 2026 and by 5% afterwards. This should support ongoing dividend increases of at least 3% per year. Enbridge raised the payout by 3.1% in 2024. The board has given investors a raise in each of the past 29 years.
At the current share price, investors can get a 7.3% dividend yield.
Is Enbridge a buy?
Ongoing volatility should be expected until the U.S. Federal Reserve and the Bank of Canada start reducing interest rates. Once that happens, the stock could catch a strong tailwind.
Enbridge pays an attractive dividend that should continue to grow and investors get paid well right now to ride out some turbulence. If you have cash to put to work, ENB stock deserves to be on your radar.
