Enbridge (TSX:ENB) is down 13% in 2023 and off more than 20% from the 2022 high. Investors who missed the bounce after the 2020 market crash are wondering if ENB stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
Enbridge stock
Enbridge trades near $46 per share at the time of writing compared to $59 at one point last year.
Rising interest rates are largely responsible for the pullback. Enbridge uses debt to finance part of its acquisitions and capital program. The jump in borrowing costs puts a dent in earnings and reduces cash available for distributions, but the decline in the stock appears overdone.
Interest rates have likely peaked and might start to come down in 2024. When that happens, Enbridge’s share price could catch a nice tailwind. On the operational side, the company is delivering steady revenue and cash flow across its four core groups.
Q3 2023 earnings
Enbridge generated solid third-quarter (Q3) 2023 results. Adjusted earnings came in at $1.3 billion compared to $1.4 billion in the same period last year. Cash provided by operating activities rose to $3.1 billion from $2.1 billion in Q3 2022.
Distributable cash flow (DCF), which is of interest to investors seeking reliable and growing dividends, increased to $2.6 billion from $2.5 billion last year.
For the first nine months of 2023, adjusted earnings were $4.38 billion compared to $4.42 billion in 2022. Cash provided by operating activities increased to $10.39 billion from $7.6 billion. DCF rose to $8.54 billion from $8.32 billion.
Growth initiatives
Enbridge is primarily known as an oil pipeline and natural gas pipeline operator. The company moves about 30% of the oil produced in Canada and the United States. It also has a large natural gas transmission network that transports 20% of the natural gas used by American homes and businesses.
In recent years, Enbridge has shifted its growth investments to new opportunities. Oil and natural gas export facilities are one area of focus. Enbridge purchased an oil export terminal in Texas in 2021 for US$3 billion. In Canada, Enbridge has a stake in the Woodfibre liquified natural gas (LNG) export site being built on the coast of British Columbia.
Renewable energy and natural gas distribution are also becoming larger parts of the asset portfolio. Enbridge acquired a large solar and wind developer last year and recently announced a US$14 billion deal to buy three natural gas utilities in the United States.
In addition, Enbridge has $24 billion in secured growth projects on the go through 2028, with $3 billion expected to go into service in 2023.
Enbridge dividend
Enbridge has increased its dividend for 28 consecutive years. The combination of the capital program and the revenue from new acquisitions should drive cash flow expansion to support ongoing dividend growth.
At the time of writing, Enbridge’s dividend provides an annualized yield of 7.7%.
Is Enbridge a buy today?
Enbridge pays an attractive dividend that should continue to grow. The stock is likely oversold at the current level and could deliver some decent capital gains when interest rates finally begin to fall.
Near-term volatility should be expected, but investors who buy now get paid well to ride out the turbulence. If you have some cash to put work in a TFSA or RRSP, ENB stock deserves to be on your radar.
