Enbridge (TSX:ENB) is up nearly 30% in the past year. Investors who missed the rally 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 focused on dividends and long-term total returns.
Enbridge stock price
Enbridge trades near $62.50 at the time of writing. The stock is picking up new momentum after a recent pullback that saw the share price dip from $65 in January to $59 last month.
A number of factors are at play right now that investors need to consider when evaluating the stock.
On the positive side, interest rate cuts that occurred in Canada and the United States in the the past six months have provided a new tailwind for pipeline and utility stocks. Lower interest charges on variable-rate debt have freed up cash that can be distributed to shareholders or used to strengthen the balance sheet.
The pullback in ENB stock that occurred from mid-2022 to the fall of 2023 largely tracked aggressive rate hikes by the Bank of Canada and the U.S. Federal Reserve as the central banks battled to get inflation under control.
Recent rate cuts have led to a decline in bond yields, along with reduced rates offered by banks on fixed income products. In Canada, investors who shifted money into guaranteed investment certificates (GICs) in 2023 when GIC rates were above 5.5% are now only able to get rates in the 3% to 4% range depending on the term and the provider. This is driving money back into top dividend stocks that currently offer better yields.
Enbridge, for example, offers a dividend yield of 6% at the time of writing. Investors with maturing GICs taken out at high rates in 2023 could increasingly move back into stocks over the next couple of years, helping drive ENB stock higher.
Dividends
Enbridge recently raised its dividend by 3% for 2025. The board has increased the distribution annually for the past 30 years. Enbridge is working on a $26 billion capital program that should drive revenue and cash flow expansion to support ongoing dividend increases.
The company has also been active with acquisitions, and that trend could continue as consolidation occurs in the energy infrastructure sector. Enbridge spent the past few years diversifying its asset base. The company acquired an oil export terminal in Texas, a U.S. developer of renewable energy, and an interest in the new Woodfibre liquified natural gas (LNG) export facility being built in British Columbia. In addition, Enbridge purchased three natural gas utilities in the United States in 2024.
Should you buy ENB stock now?
Near-term volatility should be expected. Inflation could surge again if tariffs are put in place for an extended period of time. That could force the central banks to raise rates again, which would put new pressure on utility stocks. However, ENB still looks like a solid pick at the current level for income investors who have the patience to ride out some turbulence. If you have some cash to put to work, this stock deserves to be on your radar.
