2-for1 Sale
Shares of Enbridge (TSX:ENB) have certainly not done well in 2023, and there are many reasons for it. However, there is certainly something to consider before writing off Enbridge stock altogether, and that’s its dividend.
Enbridge stock currently offers a 7.63% dividend yield as of writing. That’s an enormous amount of stable cash flow. But the question is, if shares keep falling, how stable is it?
What happened?
The reason Enbridge stock fell in the first place was due to a number of issues all coming to a head. Enbridge stock already had problems before the pandemic, with numerous social and environmental activists pushing back at the creation of more pipelines.
However, once the pandemic hit, there was a huge hit to the company’s earnings as well. With no one to work and ship the product through these pipelines, Enbridge stock suffered even more. From there, however, there were more outside factors the company had to face.
Most recently, wildfires in Western Canada have paused numerous pipelines, and it’s unclear whether this will simply be the future that Enbridge stock investors look forward to. With that all in mind, it’s clear why investors have seen shares fall to 52-week lows.
Is there upside?
Analysts remain fairly positive about at least future prospects for Enbridge stock. The company has a neutral rating in most cases, with recent earnings beating out earnings estimates. The stock has a long history of creating long-term contracts to fund growth and its dividend. Therefore, it faces “far fewer existential issues,” in the words of one analyst.
This has left the stock focused on creating growth across its network by producing more pipeline projects. What’s more, given its stability in the pipeline business, its size and scale cannot be matched by many others, especially in Canada. Therefore, there are few other pipeline stocks that have the future potential that Enbridge stock has.
But what does that future hold?
Enbridge stock is still in the oil and gas game with very little planned for a future filled with renewable energy. Even the Organization for Petroleum Export Countries (OPEC+) expects high-income countries to be almost completely away from oil and gas by 2040. That’s less than two decades for Enbridge stock to come up with another lucrative revenue stream.
Meanwhile, it’s not as if it’s done well over the last few years. The stock’s consensus target price has remained around $60 or just under for years. It’s led to many leaving the stock behind, stating the dividend isn’t worth it if it’s not offering the safety that was there in the past.
So, while Enbridge stock may have a current dividend yield at 7.63% as of writing, to me, it’s not worth it. If you’re looking for returns from this stock, it’s remained stagnant or lower through the last several years, after peaking in 2015. That’s now almost a decade of no growth. So, if you’re hoping for returns, I would consider another dividend stock.
