Enbridge (TSX: ENB) is down from its 12-month high. Investors who missed the big rally off the 2023 slump are wondering if ENB stock is now undervalued again and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) focused on dividends and total returns.
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Enbridge share price
Enbridge trades near $63.50 at the time of writing. The stock was as high as $70 at the end of September, but has since been on a downward trend.
Changes in interest rates in Canada and the United States can impact Enbridge’s share price. In 2022 and 2023, when the central banks aggressively raised rates, the stock fell as investors worried that the increase in debt expenses would force the company to trim its generous dividend. That didn’t happen. In fact, Enbridge has continued to increase its distribution.
The start of the rebound in the stock price occurred in late 2023 when markets shifted from expectations of more rate hikes to anticipation of rate cuts. The central banks delivered the rate reductions in 2024 and 2025. This provided a tailwind for Enbridge and the share prices of other rate-sensitive companies. Pipeline and utility businesses need to invest billions of dollars on large capital projects to drive revenue growth. These assets can take years to build, so the companies use debt to fund the developments until they are completed and go into service. The big spike in borrowing costs over such a short period of time surprised the market, which is why the energy infrastructure stocks had a rough ride.
Looking ahead, the U.S. is expected to cut rates in 2026. Canada will likely keep rates at the current level. This means there should be support for Enbridge to drift higher, based on the rate outlook.
On the operational side, Enbridge is working on a $35 billion secured capital program that is expected to deliver steady revenue and cash flow expansion over the next few years. This should support ongoing dividend increases. Enbridge raised the dividend in each of the past 31 years.
Risks
A surge in inflation caused by tariffs could force the U.S. central bank to cut rates less than expected or put further reductions on hold. In Canada, a jump in inflation could lead to a rate hike. In this scenario, Enbridge would face new headwinds.
The anticipated increase in exports of heavy oil to the United States from Venezuela could lead to reduced exports to American refineries from Canada. That translates into lower volume through Enbridge’s oil pipelines. Analysts say the impact could be about a 10% hit for Canadian oil exports to the United States. Time will tell if the drop actually materializes.
Opportunity
Enbridge diversified its asset base in recent years. It acquired an oil export terminal in Texas and purchased the third-largest wind and solar developer in the United States. Enbridge also bought three American natural gas utilities for US$14 billion. In addition, the company is a partner on the Woodfibre liquefied natural gas (LNG) export facility being built on the coast of British Columbia. The broadening of the business operations beyond the core oil and natural gas transmission network balances out the revenue stream and provides extra opportunities for growth.
Time to buy?
The overall market is due for a pullback, so additional weakness could be on the way. That being said, investors seeking reliable dividend income can now get a 6% yield on the stock, so Enbridge deserves to be on your radar at this level. Further downside would be viewed as an opportunity to add to the position.
