Enbridge (TSX: ENB) reported strong earnings and reiterated 2026 guidance of 3% growth in distributable cash flow (DCF) and 4–6% growth in adjusted earnings per share (EPS). Despite this, the stock fell 3.3%. Why?
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Why did Enbridge’s stock fall?
Although Enbridge has a low-risk business model, it is vulnerable to geopolitical tensions as it facilitates the export of oil and gas. Oil prices fell to the lowest level in four years ahead of the peace talks between Russia, Ukraine, and the United States. The presidents of the three nations are going to meet over the weekend to negotiate peace talks, according to a Reuters report.
If successful, some of the U.S. sanctions on Russian oil and gas could be eased, creating an oil glut. An oversupply of oil tends to drive down the price. Canada cannot beat Russia and Saudi Arabia’s oil prices.
Until now, North America has been a beneficiary of the sanctions on Russian oil and gas. New markets in Europe and Asia opened up for Canadian oil and gas companies. Enbridge’s share price also surged from $40 to $60 as the company accelerated capital spending on gas pipelines to take significant market share in North American liquified natural gas (LNG) exports. Hence, any update on Russian sanctions being lifted will affect Enbridge’s share price.
Even when the U.S. put a 10% tariff on Canadian oil imports in February 2025, Enbridge’s stock fell 8% and continued to fall by 8% in the tariff talks ahead. The dip came as tariffs would reduce the oil volumes being transmitted to the U.S. Enbridge’s management also confirmed that tariffs may not have a short-term impact, but if tariffs are prolonged, the impact could be significant.
This direct exposure to geopolitical situations causes volatility in Enbridge’s share price.
Should you buy Enbridge Stock after its 2025 results?
Now for the question, is Enbridge a buy at the dip? The answer is visible in the 2025 performance. The tariffs did not ease. Canadian oil exports adjusted to the 10% tariff. Enbridge found a way around the tariff situation. Remember, Enbridge is a strategically important company for the export-led Canadian economy.
The Canadian government is looking to diversify its trade partners, and that will create some chaos over the short term. Change is difficult as it involves coming out of your safety net and exploring new opportunities. Enbridge stock will rise and fall in the short term depending on developments around the Russia-Ukraine peace talks.
However, its fundamentals and dividend-paying capability will not be affected. The company has long-term supply contracts and a toll rate that keeps cash flowing in. It also keeps the dividend payout ratio in the 60–75% range of distributable cash flow (DCF).
This DCF is after deducting debt payments and capital expenditure. Thus, the company slowed its dividend growth rate from 9.9% in 2020 to 3% from the 2021–2026 period. The cash flow was directed towards capital expenditure. Enbridge plans to bring online $8 billion worth of projects in 2026, which could increase its cash flow. Moreover, it will reduce its leverage, giving it flexibility to accelerate dividend growth to 5% from 2027 onwards.
Since the business outlook remains unchanged, you could consider buying the stock at the dip if you seek safe dividends.
Final thoughts
The Russia-Ukraine situation could keep oil and gas stocks volatile in 2026. If you are a risk-averse investor, there are better dividend stocks at the moment offering a higher dividend growth rate and lower volatility. Manulife Financial is a stock worth considering, as one often finds solace in insurance at times of high risk. It can also give you a 7–10% dividend growth rate, considering its 12-year average annual dividend growth rate of 10.7%.
