The timing could haven’t been more perfect for Enbridge to acquire three US gas utilities back in October 2024. A US$14 billion acquisition, which added debt to the balance sheet and prolonged the 3% dividend growth, bore fruit in the form of rising share prices in 2025. Enbridge’s stock price surged 17% 5 months before and 27% 12 months after the acquisition. The energy infrastructure company is now ready for the next growth cycle, this time from renewable energy projects from hyperscalers like Meta (NASDAQ: META).
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Here’s what Enbridge stock could look like by the end of 2026
Since Enbridge has expanded its presence in US utilities, it is important to take note of the situation there. US utilities are suffering from a temporary slowdown as demand is outstripping supply. But shouldn’t that be good news for utilities? Rising electricity and gas bills are a national issue in the United States, which is seeing resistance to utility rate increases. However, Enbridge continues to enjoy reasonable rate hikes.
Enbridge is tapping two major energy growth trends:
- North America liquified natural gas (LNG) exports: The Woodfibre LNG project is scheduled to come online in 2027, supporting LNG exports directly from Canada.
- Data centre energy infrastructure: At the core of an artificial intelligence (AI) data centre is energy infrastructure, and Enbridge is building the same with Meta. It is expanding its partnership with Meta to supply 365 MW of solar and a 200 MW/1600 MWh battery energy storage system for the hyperscaler’s data centres.
Over US$8 billion worth of projects are scheduled to come online in 2027 and start generating cash flow. Half of these are renewable energy projects. This diversification of cash flow streams beyond pipelines and into utilities will reduce Enbridge’s dependence on pipeline toll money.
With 2027 cash flow streams slated to increase, Enbridge is on track to increase its dividends at a 5% compounded annual growth rate (CAGR) from 2027 onwards. The new projects could also drive the stock price by another 15%.
Enbridge stock moves from seasonality to cyclicality
The two growth trends have shifted Enbridge stock away from being range-bound since the 2015 oil crisis. The stock has moved from seasonal rallies during winters to the cyclical growth of data centre infrastructure and diversifying LNG exports.
Although Enbridge stock is trading near its all-time high, there is still more upside for the stock as the company announces dividend growth in December. The share price rally has reduced its dividend yield to 5% at present from 7% in 2024, but 5% is still a good yield.
If you own the stock, keep holding it as the next four years could be rewarding, with US$40 billion worth of projects coming online.
The downside risk
While all the cards seem to be in Enbridge’s favour, especially with its low-risk business model, there is always a risk of a downside. Firstly, its 26 times price-to-earnings ratio is the highest in a year. However, a larger number of faster-turnout renewable energy projects and brownfield expansions justify this valuation.
Secondly, an energy demand pullback like the one in the 1980s oil crisis could send the entire energy sector into a downturn. Enbridge could suffer from lower utilization rates. However, the probability of such incidents happening is very rare, and Enbridge can sustain such a crisis. It has proven its low-risk model during the pandemic when oil demand dropped suddenly.
What should investors know?
Every investment carries risks. Investors should look at the risk versus the rewards. For Enbridge, rewards in the form of dividend growth, share price rally, and a diversified revenue stream far outweigh the risks. Enbridge continues to be the evergreen dividend stock, which has aligned its business strategy to make the most of the changing energy landscape.
