Enbridge (TSX: ENB) stock is a compelling Buy for patient, income-focused investors following a 17% pullback over the past three months that pushed its dividend yield up to 5.8%. While recent buyers may face painful paper losses, this sell-off may represent an attractive entry point for long-term passive income, rather than a structural red flag.
Enbridge’s recent drop has been a result of a sequence of compounding pressure points. Its second-quarter earnings report highlighted leverage rising to 5.1 times Debt-to-EBITDA (adjusted earnings before interest, tax, depreciation and amortization) in a marginally rising interest-rate environment. The market anticipates a debt-funded expansion, and Enbridge’s $3 billion equity offering capped off the decline.
Still backed by a 30-year dividend growth streak, a $41 billion capital projects backlog, and over 98% of EBITDA sourced from long-term or regulated contracts, existing investors in the dividend champion may comfortably Hold, while aggressive growth seekers should Sell.
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Decoding ENB stock’s recent 17% pullback
Understanding why Enbridge stock fell requires looking past the headline-grabbing September equity raise. The downward momentum actually began weeks earlier, when Enbridge’s second-quarter financial results, released July 31, revealed that higher interest servicing costs were squeezing earnings margins.
Crucially, its leverage ratio ticked up to 5.1 times Debt-to-EBITDA, breaching the upper boundary of management’s 4.5 times to 5 times target ceiling. Although mismatches in currency translation rates are partly to blame for the leverage metric’s breach, rising leverage during a time when interest rates appear ready to start rising depresses bond proxies like ENB, as institutional investors grow wary of balance sheet strain.
Investor caution intensified in late August as rumours swirled around capital-intensive acquisitions. When Enbridge formally announced its US$2.6 billion purchase of Tallgrass Energy’s crude business alongside Permian gathering assets from Salt Creek Midstream, markets had already priced in the inevitable share dilution. The subsequent $3 billion bought-deal equity raise, priced at a discounted $66.85 per share, simply served as the final capstone that locked in the lower trading range on ENB stock.
Enbridge still an unshakeable cash flow generator
Despite its seemingly temporary balance sheet headwinds, Enbridge’s operational foundation remains rock-solid. Its operating income remains anchored by cost-of-service regulations or long-term take-or-pay contracts, insulating earnings and cash flow from commodity price volatility.
Recently acquired Tallgrass assets carry long-term contracts with investment-grade counterparties and will be accretive to Distributable Cash Flow per share in their first full year of ownership.
Following its massive expansion into U.S. natural gas utilities, Enbridge now operates as North America’s largest natural gas utility provider by volume. Combined with a $41 billion secured organic growth backlog, the company possesses clear long-term visibility to support its targeted 3% to 5% annual distributable cash flow growth.
New investors securing a well-covered 5.7% starting yield on this tollbooth monopoly during a temporary 17% drop could earn an expected annual total return of 7% to 10% over the next five years.
The capital gains reality
Enbridge stock generated more than 21% in capital gains between January and July 2026, but it has given up all the year-to-date gains.
Prospective buyers of ENB stock must lower their expectations regarding capital appreciation. Enbridge won’t be a fast-paced capital growth story. Rising debt-servicing costs and regular share issuances required to finance expansion mean that dividend growth has settled into modest annual increases of roughly 3%.
The dividend stock functions as a high-yielding, slow-moving utility bond proxy. Investors buying shares today won’t experience rapid share price acceleration, because ENB’s long-term investment case relies predominantly on collecting stable, inflation-beating dividend income while management integrates its newly acquired assets and builds a renewable energy portfolio.
Foolish bottom line: Buy, Sell, or Hold?
Enbridge stock is a foundational core holding for conservative Canadian income portfolios. Passive income seekers should view the 17% pullback as a prime buying opportunity to lock in a dependable 5.7% yield within a diversified portfolio.
Current shareholders may comfortably hold their positions, allowing quarterly dividend reinvestment to compound while management works leverage back toward its 4.5 times to 5 times target.
However, aggressive growth investors seeking index-outperforming capital gains should pass or sell ENB, as capital will remain tied up in a defensive, slow-growth holding.
