We are halfway through 2025. In these six months, Enbridge (TSX: ENB) stock saw two sharp dips of over 8% due to tariff uncertainty. The management doesn’t expect tariffs to have a material impact on its operations. Supporting this statement were the company’s strong first-quarter earnings, its 2025 financial guidance, and its three-year financial outlook.
Source: Getty Images
Enbridge’s growth focus for the next three years
Enbridge operates oil and gas pipelines, gas storage, gas utilities, and renewable power plants. It earns cash from the toll money calculated on the oil and gas volumes transmitted through the pipelines. It also earns cash from the utility bills calculated on the natural gas and energy consumed.
Liquid pipelines: 25% of its total adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) comes from the Mainline system. The system comprises several lines that connect Canadian oil sands reserves with American refineries. The company will invest $2 billion in the Mainline system for the next three years to support operational efficiency and system reliability.
Gas pipelines: Enbridge earns 20% of its adjusted EBITDA from US gas transmission, and is focusing on expanding its gas pipelines organically and through acquisitions.
- The US Gulf Coast: Enbridge has acquired a 10% interest in Matterhorn Pipeline, which will be completed by the second quarter. It has also sanctioned a 13.3% interest in Traverse Pipeline, which is expected to be completed by 2027.
- The West Coast: Enbridge will invest $400 million in the Birch Grove project to expand the transmission capacity of the T-North System by 180 million cubic feet per day. This project is expected to be completed in 2028.
Gas utility: Enbridge acquired three US gas utilities in 2024, which now account for 12% of its adjusted EBITDA.
Enbridge’s capital investment plan till 2028
Enbridge has secured a $28 billion capital program till 2028 for expansion projects. Around 43% of this capital will be allocated to the expansion of gas transmission pipelines. Around US$3.1 billion will be allocated to US gas utility growth.
Of the $28 billion, it has sanctioned $5 billion in capital so far. It can sanction $9–10 billion annually using free cash flow and EBITDA growth.
All these expansion plans are on track to generate incremental cash flows for Enbridge. It is also optimizing the use of its assets, which could add around $600–$900 million to its EBITDA by 2027.
Enbridge’s three-year outlook
2025: It expects to grow its 2025 adjusted EBITDA by 9.4% to $19.7 billion, driven by income from three US gas utilities and the new pipelines that came into operation.
It expects distributable cash flow (DCF) to grow by 1.8% to $5.7 at the midpoint. The strengthening US dollar and US interest rate cuts could drive DCF as a 25-basis-point cut would save it $2.5 million in monthly interest expenses.
2027: Enbridge expects $23 billion of growth capital to enter service by 2027. It expects these new assets to grow adjusted EBITDA at a 7–9% compounded annual growth rate (CAGR) in the 2023–2026 period. From 2027, it expects EBITDA growth to normalize to 5%.
Enbridge expects to grow its dividend per share by 3% annually by 2026 and accelerate the growth rate to 5% from 2027 onwards.
Investor takeaway
Enbridge has met or exceeded its guidance for 20 years in a row and is progressing toward achieving its next three-year growth outlook. These three years will see accelerated growth driven by the gas business expansion. Now is a good time to buy Enbridge stock, lock in a 6% yield, and enjoy share price growth.
