Enbridge (TSX:ENB) has a long track record of delivering reliable dividend growth. The market correction that occurred in recent months has pushed the share price down to the point where Enbridge stock now offers a very high yield. Investors searching for top stocks to buy for their Registered Retirement Savings Plan (RRSP) are wondering if this is a good time to add Enbridge to their portfolios.
Enbridge overview
Enbridge is a leading player in the North American energy infrastructure sector and one of Canada’s largest companies with a current market capitalization of close to $104 billion. The business moves about 30% of the oil produced in Canada and the United States. This makes Enbridge’s assets strategically important for the two countries. The challenges faced in constructing new large oil pipelines should make existing infrastructure more valuable in the coming years.
Global oil use is expected to rise, as China’s economy rebounds, airlines ramp up capacity, and commuters return to the highways. This should support steady volume flows through Enbridge’s transmission network and storage facilities.
On the natural gas side, Enbridge transports 20% of the natural gas used in the United States. The company also has natural gas utilities that distribute the fuel to millions of homes and businesses.
Renewable energy assets round out the portfolio. Enbridge has wind, solar, and geothermal operations. The purchase of a U.S. renewable energy development firm last year suggests the management team plans to expand this segment in the coming years.
Enbridge trades near $51.50 per share at the time of writing. That’s down from the 2022 high around $59.50 the stock reached in June.
Opportunities
With international buyers increasingly turning to the United States and Canada for reliable oil and natural gas supplies, Enbridge has focused recent investments on the export market. The company purchased an oil export terminal and related infrastructure in 2021 and secured a 30% interest in a liquified natural gas (LNG) development in British Columbia last year.
Enbridge is also exploring opportunities in hydrogen and carbon capture.
Earnings
Enbridge generated solid results in 2022. Adjusted earnings rose to $5.69 billion from $5.55 billion in the previous year. Distributable cash flow (DCF) jumped nearly 10% to $11 billion, or $5.42 per share. Management expects DCF to be $5.25 to $5.65 per share in 2023.
The current $18 billion capital program should help support revenue and cash flow growth over the medium term.
Dividends
Enbridge increased the dividend by 3.2% for 2023. This is the 28th consecutive annual boost in the distribution. Investors should see payout growth continue, supported by the capital program and any accretive cash flow boost that could come from additional acquisitions.
At the time of writing, investors can get a 6.9% dividend yield.
Is Enbridge stock a buy today?
Ongoing volatility should be expected in the market in the coming months, but buy-and-hold RRSP investors with some cash to put to work might want to add Enbridge to their portfolios while the stock is out of favour.
The pullback in the share price appears overdone when you consider the solid performance in 2022 and the decent 2023 guidance. Oil and natural gas demand is expected to grow in the coming years, and Enbridge’s dividend should be safe, so you get paid well to wait for the rebound in the stock.
