Enbridge (TSX:ENB) has enjoyed a big rally in the past two years. Investors who missed the rebound are wondering if ENB stock is still 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 share price
Enbridge trades near $68 per share at the time of writing, compared to $44 a little more than two years ago.
Interest rate hikes by the Bank of Canada and the U.S. Federal Reserve in 2022 and 2023 triggered the pullback in the share price, which was as high as $59 in 2022. By late 2023, sentiment started to shift from fear of more rate hikes to anticipation of lower rates in 2024, leading to the subsequent rebound. Cuts to interest rates that occurred in 2024 and 2025 provided an extra tailwind.
Enbridge uses debt to fund part of its large growth program that includes strategic acquisitions and development projects. The sharp jump in rates over such a short period of time drove up borrowing costs. Higher debt expenses reduce profits and can cut into cash available for distributions to shareholders. At one point, analysts started to float the idea that Enbridge might be forced to trim its generous dividend.
That didn’t materialize, and the reduction of interest rates has eased pressure on the balance sheet.
Risks
Tariffs could start to push inflation higher in the United States in 2026 as businesses that stocked up on inventory ahead of the tariffs are forced to replenish supplies at higher prices. If inflation trends upward next year, the central bank will likely have to keep rates at current levels, or even raise rates again to keep inflation under control. In this scenario, Enbridge’s share price would likely face new headwinds.
Opportunity
Enbridge is benefiting from revenue and cash flow contributions from its US$14 billion acquisition of three natural gas utilities in the United States in 2024. The company is also putting new development assets into service as they are completed. Enbridge continues to add projects to the development backlog, which now sits at $35 billion through 2030.
Demand growth for oil, natural gas, and electricity should ensure steady additions to the capital program in the coming years.
Dividends
Enbridge raised its dividend in each of the past 30 years. Ongoing distribution growth should be in line with the anticipated 3% to 5% annual expansion of distributable cash flow over the medium term. Investors who buy ENB stock at the current level can get a dividend yield of 5.5%.
Time to buy?
The broader market is due for a pullback, and Enbridge would likely give up some of its gains when that happens, especially if the dip is triggered by expectations that interest rates could move higher.
That being said, income investors should be comfortable owning the stock at this level. Any weakness would be viewed as an opportunity to add to the position.
Investors who are more focused on capital gains and think interest rates will continue to decline might want to take a small position now. Those expecting rates to move higher should wait to see if a better entry point emerges.
