After declining by nearly 10% in 2023, Enbridge (TSX:ENB) stock seems to be regaining strength in recent months. ENB stock has gone up by more than 12% over the last seven months to currently trade at $49.53 per share with a market cap of $104.8 billion. At this market price, it offers an impressive 7.4% annualized dividend yield and distributes these dividend payouts every quarter.
But can Enbridge continue to deliver strong returns to investors in the years ahead? Before discussing where the stock might stand three years from now by looking at the factors that are likely to influence Enbridge’s future performance, let’s first review the drivers of its recent recovery.
Key factors helping Enbridge stock recover
The main reason for Enbridge stock’s recent recovery could be the resilience of its core business, which consists of transporting and storing crude oil and natural gas across North America. Despite the challenges posed by warmer weather and largely weaker commodity prices in recent quarters, the company is continuing to maintain positive earnings growth, robust cash flows, and dividends.
In the first quarter of 2024, Enbridge’s total revenue fell 8.6% YoY (year over year) to around $11 billion as significantly warmer weather affected the performance of its gas distribution and storage segment. Nevertheless, despite this negative factor, along with higher operating costs, the company’s adjusted quarterly earnings jumped by 8.2% YoY to $0.92 per share, beating Street analysts’ expectations of $0.81 per share. Similarly, its adjusted net profit margin expanded to 17.7% in the latest quarter from 14.3% a year ago.
These positive factors might have supported a recovery in Enbridge’s stock price in recent months, as investors might have appreciated its strong earnings potential despite unfavourable market conditions.
Where will Enbridge stock be in three years?
Besides continued strength in its core energy transportation business, Enbridge, in recent years, has increased its focus on further diversifying its revenue stream. This is one of the key reasons why the company is investing in segments like crude oil export and renewable energy.
Also, its strong cash flows and robust financial position give it the ability to invest in future growth. For example, in the first quarter, Enbridge completed the acquisition of The East Ohio Gas Company (known as Enbridge Gas Ohio now) in a deal worth US$6.6 billion, which is expected to improve its position in the gas distribution market and help it accelerate financial growth trends.
While it’s nearly impossible for anyone to accurately predict where Enbridge stock will be three years from now, its strong fundamentals and diverse revenue streams indicate that it has a bright future ahead, which can help its share prices continue soaring in the coming years. That said, if you expect to multiply your invested money in a short period of time, ENB stock might not be the best option for you. However, if you are looking for a long-term investment that can provide you with a steady dividend income and capital appreciation, then you might want to consider adding Enbridge stock to your portfolio. Also, the fact that it has a solid track record of increasing its dividends for 29 consecutive years makes it even more appealing for long-term income investors.
