2-for1 Sale
Enbridge (TSX:ENB) is still down 11% over the past year, even after a fourth-quarter (Q4) bounce off the 2023 lows. Investors seeking reliable TSX dividend stocks are wondering if ENB stock is undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) focused on passive income.
ENB stock price
Enbridge trades for close to $48 per share at the time of writing. This is up from $43 in early October but still down materially from the $59 the stock reached at the 2022 high point before the Bank of Canada and the U.S. Federal Reserve started to aggressively raise interest rates.
Enbridge is a giant in the North American energy infrastructure industry with a current market capitalization of nearly $102 billion and is known for its vast oil and natural gas transmission networks. Enbridge moves roughly a third of the oil produced in Canada and the United States and about 20% of the natural gas that is used by American homes and businesses.
Growth initiatives in recent years have focused on new segments. The company has expanded its renewable energy portfolio and is taking advantage of opportunities on the export side through its purchase of an oil export terminal in Texas and the minority stake it holds in the Woodfibre liquified natural gas (LNG) facility being built in British Columbia. Enbridge is also set to become the largest natural gas utility operator in North America through a US$14 billion acquisition of three natural gas utilities in the United States.
The revenue contribution from 2023 acquisitions, as well as new assets completed as part of the capital program, will drive cash flow growth this year. Enbridge expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to rise by about 4% in 2024, and this doesn’t take into consideration the boost that would come from the new American utilities once the deals are closed. Distributable cash flow (DCF) should rise by about 3% in 2024.
Looking ahead, the $25 billion capital program should support additional DCF growth in the coming years.
Dividends
Enbridge raised the dividend by 3% for 2024, marking the 29th consecutive annual hike to the payout. This is important for investors who are seeking reliable dividend stocks that can generate growing passive income. At the current share price, the dividend provides an annualized yield of 7.6%.
Is ENB stock a good buy today?
Enbridge pays an attractive dividend that should continue to grow. The stock is probably still undervalued and could move higher through the year if anticipated interest rate cuts in Canada and the United States materialize.
Ongoing volatility should be expected, given the uncertain economic and geopolitical climate, but investors get paid well to ride out any additional turbulence. If you have some cash to put to work in a TFSA targeting passive income, ENB stock deserves to be on your radar.
