The global equity markets have turned volatile amid the ongoing US-Israel-Iran conflict. Also, Iran has announced the closing of the Strait of Hormuz, through which roughly 20% of the world’s oil supply passes. These disruptions have led to higher oil and natural gas prices, thereby fueling inflationary pressures and potentially preventing or delaying the Federal Reserve’s anticipated interest rate cuts. Amid these fears, the S&P/TSX Composite Index has fallen by over 4.2% from its last week’s highs and is up just 4.4% for this year.
However, Enbridge (TSX:ENB) has outperformed the broader equity markets, with a year-to-date return of 12.4% and is down just 1.2% from its recent highs. Therefore, let’s look at its business outlook, recent performance, growth prospects, and valuation to determine whether there are buying opportunities in the stock.
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Enbridge’s business outlook
Enbridge is a leading energy infrastructure company that transports crude oil and natural gas across North America through tolling frameworks and long-term take-or-pay contracts. In addition to its pipeline operations, it operates three natural gas utilities in the United States and owns 41 renewable energy assets with a combined power-generating capacity of 7.23 gigawatts. A substantial portion of these renewable assets is supported by long-term power purchase agreements, delivering stable, predictable cash flows.
The company generates about 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets or long-term contracts. This structure helps shield its financial performance from commodity price fluctuations and enables it to deliver stable and predictable cash flows. Backed by this resilient business model, Enbridge has met or exceeded its financial guidance for the past 20 consecutive years.
Supported by these strong fundamentals, the company has delivered an average total shareholder return of about 12.5% over the past two decades. It has also paid dividends for more than 70 consecutive years and increased its dividend for the last 31 years. Its quarterly dividend of $0.97 per share currently yields around 5.3%.
Moreover, the company reported solid financial performance for 2025 in February. It placed roughly $5 billion worth of projects into service last year and sanctioned $14 billion in new organic growth projects. Meanwhile, Enbridge reported adjusted EBITDA of $20 billion, up 7.2% year over year, while its adjusted earnings per share rose 7.9% to $3.02. Contributions from recently acquired gas utilities, colder weather, favourable rate revisions, and customer growth supported this strong performance.
Now, let’s take a closer look at its growth prospects.
Enbridge’s growth prospects
Despite the accelerating shift toward clean and renewable energy, oil and natural gas could remain significant components of the global energy mix for years to come. In addition, rising oil and natural gas production in Canada is supporting demand for Enbridge’s infrastructure and services.
Meanwhile, the energy infrastructure company has identified approximately $50 billion in growth opportunities over the next five years and plans to invest $10 billion to advance these projects.
Amid these expansion initiatives, management expects its adjusted EBITDA, adjusted earnings per share, and distributable cash flow per share to grow at a mid-single-digit rate for the remainder of the decade. Along with these growth prospects and its dependable business model, the company’s strong liquidity position – $10.8 billion at the end of last year – should help support the safety and sustainability of its future dividend payouts.
Investors’ takeaway
Enbridge’s stock has seen strong buying momentum over the past 12 months, rising by approximately 26%. As a result, its valuation has expanded, with its NTM (next 12 months) price-to-sales and price-to-earnings multiples currently at 2.6 and 24.4, respectively. While these valuations may appear somewhat elevated, I believe they are justified given the company’s dependable business model, strong financial position, consistent dividend payouts, and solid long-term growth prospects. Therefore, I believe Enbridge represents a compelling investment opportunity amid the current uncertain market environment.
