Enbridge (TSX: ENB) pulled back in recent weeks after chalking up a major rebound over the past two years. Investors who missed the recovery are wondering if ENB stock is now oversold again and 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.
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Enbridge share price
Enbridge trades below $70 per share at the time of writing, compared to more than $80 at the 2026 high. The dip has pushed the dividend yield to 5.6%.
The decline is likely due to a number of factors.
To start, investors who bought the stock in late 2023 might simply be taking some profits ahead of potential economic headwinds caused by the trade battle brewing between Canada and the United States.
Enbridge has also put one of its projects on hold. The company is delaying its $1.4 billion Mainline oil pipeline expansion due to a lack of commitment from Canadian producers to fill the extra capacity that would enable an additional 250,000 barrels per day to flow to the United States. This is the second phase of the Mainline volume increase. Oil producers are waiting for more clarity on proposed regulatory and policy changes before allocating the funds required to boost output.
Ongoing uncertainty around Enbridge’s Line 5 pipeline is another issue that could be making investors uncomfortable. The company’s plan to build a new tunnel for the section of the pipeline that runs under the Straits of Mackinac, where Lake Michigan meets Lake Huron, has been blocked. At the same time, the governor of Michigan has been trying to get the pipeline closed.
Finally, rising yields on American and Canadian government bonds are driving up borrowing costs. Markets are anticipating hikes in interest rates from the central banks as rising oil prices threaten to push inflation higher. The last time the central banks aggressively raised interest rates in 2022 and 2023, Enbridge’s share price fell from $59 to $44. Enbridge uses debt to fund part of its large growth program, so higher borrowing costs can put a dent in profits and reduce cash available for dividends.
Upside
Enbridge is working on a $41 billion secured capital program that is expected to drive 5% annual increases in adjusted earnings and distributable cash flow over the medium term. This should support steady dividend increases. Enbridge raised the dividend in each of the past 31 years.
Enbridge expanded its American presence in recent years through strategic acquisitions. The company bought an oil export terminal in Texas and purchased three American natural gas utilities. Enbridge is positioned well to benefit from anticipated growth in the U.S. energy sector amid rising demand for natural gas.
The bottom line
Near-term market volatility is expected, and more downside is certainly possible for ENB, but Enbridge’s yield looks attractive right now for income investors, and further weakness in the share price would be an opportunity to add to the position. If you have some cash to put to work in a dividend portfolio, this stock deserves to be on your radar.
