Is Enbridge Stock a Good Buy in May 2024?

Boasting high-yielding dividends and a stable underlying business, Enbridge (TSX:ENB) might be a great buy for your self-directed investment portfolio right now.

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The Canadian stock market offers plenty of opportunities for investors to put their money to good work. The TSX features excellent stocks for investors seeking growth through capital gains. Several TSX stocks also offer capital gains and high-yielding dividends.

Not all dividend stocks boasting high dividends are good investments. To be a viable holding to achieve your financial goals, the underlying business must be capable of supporting payouts. To this end, Enbridge (TSX:ENB) can be a terrific investment to consider for your self-directed portfolio.

The stock offers significant growth potential through long-term capital gains and high-yielding dividends. Here is a better look at the stock to see why it might be an excellent investment right now.

Enbridge stock

As of this writing, Enbridge stock trades for $51.15 per share, down by around 13% from its 2022 levels. Since then, the series of interest rate hikes in Canada and the U.S. threw the entire stock market off. Higher key interest rates made borrowing more expensive for companies, weighing on financials. As a result, share prices started going down across the board.

While interest rates are expected to go down in June, high rates are an ongoing issue. Enbridge is in the process of closing acquisition deals worth US$14 billion and working through a $25 billion secured capital program backlog. Since it relies on debt to partially fund the growth program, higher borrowing costs continue to impact its cash flows.

Central banks increased interest rates to combat inflation. Inflation rates in Canada were at 8% in June 2022 but dropped to 2.9% in March 2024. Economists predict central banks will make rate cuts to achieve a soft landing for the economy. A decline in key interest rates can provide a massive boost to Enbridge stock.

Enbridge dividends

Enbridge stock has increased its dividends for the last 29 years, cementing its place as a Canadian Dividend Aristocrat. The company expects a growth in cash flow in the coming years through its acquisitions and capital programs.

Economists predict that the improvement might mean Enbridge stock can deliver a 3-5% dividend hike for several years. As of this writing, Enbridge stock distributes payouts at a juicy 7.16% dividend yield.

Foolish takeaway

The $109.21 billion market capitalization remains one of the largest energy infrastructure businesses in North America. It is responsible for transporting a large portion of hydrocarbons produced and consumed in the region, making it vital for the economy. In recent years, Enbridge has also started investing in other segments of the industry, including renewable energy.

Enbridge is targeting a 7-9% average annual growth in its earnings before interest, taxes, depreciation, and amortization (EBITDA) till 2026. While it remains to be seen when exactly the interest rate cuts will come, they are expected to happen sometime this year.

Enbridge stock looks like a good bet for investors who want to lock high-yielding dividends in their self-directed portfolios. Once it gets the necessary tailwind, it can also offer substantial growth through capital gains, increasing shareholder values.

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.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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