Is It Too Late to Buy Enbridge Stock?

Enbridge’s solid underlying business, expanding renewable assets, and high dividend yield make it an enticing buy.

| More on:
analyze data

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Enbridge (TSX:ENB) is a diversified energy company that utilizes its pipeline network to transport oil and natural gas across North America. It also has a strong presence in the natural gas utility business and is expanding its footprint in the renewable energy space. The company earns around 98% of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from cost-of-service contracts and regulated assets. Besides, around 80% of its adjusted EBITDA is inflation-indexed, thus shielding its financials from rising prices.

Supported by its solid underlying business, the energy company has delivered over 760% returns over the last 20 years at an 11.4% CAGR (compound annual growth rate). Meanwhile, businesses, governments, and individuals are increasingly moving towards clean energy amid growing awareness of environmental pollution. So, let’s assess whether Enbridge could still replicate its previous performances in the coming years.

First, let’s look at its performance in the recently announced fourth quarter that ended on December 31.

Created with Highcharts 11.4.3Enbridge PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Enbridge’s fourth-quarter performance

Last week, Enbridge reported its reported fourth-quarter performance, with net earnings of $1.7 billion. It’s a substantial improvement from net losses of $1.1 billion in the previous year’s quarter due to the absence of a $2.5 billion goodwill impairment related to gas transmission in 2023. However, removing special items, its adjusted EPS (earnings per share) stood at $0.64, a 1.6% increase from the previous year’s quarter. Higher mainline volumes, increased contributions from the Midcontinent and Gulf Coast segment due to higher volumes, and growth in the Canadian utility segment’s customer base and rate hikes drove its earnings. However, higher interest expenses offset some of the increases.

Meanwhile, the company also generated an adjusted EBITDA of $4.1 billion, representing a 5% increase from the previous year’s quarter. Its distributable cash flows rose 2.6% to $2.7 billion. The company’s financial position also looks healthy, with its liquidity at $23 billion as of December 31.

Now, let’s look at its growth prospects.

Enbridge’s growth prospects

Last year, Enbridge put around $2 billion worth of projects into service and acquired $3 billion of assets, which could boost its financials in the coming quarters. Besides, the company is continuing with its $24 billion secured capital program and expects to put $4 billion worth of projects into service annually for the next two years. Meanwhile, it is working on acquiring three utility assets in the United States for $12.8 billion and has already garnered $10 billion in secured assets. The company is hopeful of closing the deal this year.

The Calgary-based midstream energy company has met its guidance for 18 consecutive years. Now, it has provided optimistic 2024 guidance despite the challenging macro environment. The management expects its 2024 adjusted EBITDA to come in between $16.6 and $17.2 billion, with the midpoint representing a 2.4% increase from 2023. The midpoint of its DCF/share (discounted cash flows) guidance represents a 2.2% increase. The guidance does not include the contribution from the proposed acquisition of utility assets. Notably, the company is also expanding its presence in the renewable energy space, which is encouraging.

Investors’ takeaway

Supported by its solid underlying business and stable cash flows, Enbridge has been paying dividends for 69 years. It has also hiked its dividend for 29 consecutive years at a CAGR of 10%. It currently pays a quarterly dividend of $0.915/share, with its forward yield at 7.89%. Besides, it also trades at a reasonable valuation, with its NTM (next 12 months) price-to-earnings multiple at 16.6.

So, despite the increasing transition towards clean energy, I believe Enbridge would be an excellent buy, given its solid underlying business and expanding renewable assets.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Canada national flag waving in wind on clear day
Dividend Stocks

April’s Best Opportunities: Where I’d Invest $5,000 in 3 Canadian Stocks

I'd be comfortable allocating money to Air Canada (TSX:AC) stock.

Read more »

ways to boost income
Dividend Stocks

Invest $20,000 in 2 Dividend Stocks for $1,224.68 in Passive Income, Even if the Loonie is Low

If you want to make some extra income, then these two dividend stocks are a great choice.

Read more »

investment research
Dividend Stocks

Down 44% in 2025: Is TFI Stock a Buy?

Here’s why TFI stock’s sharp decline could be a golden opportunity for long-term investors.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

3 Dividend Stocks Offering At Least a 6% Yield for Retirees

Retirees can build a portfolio with these high-yield stocks that provide reliable income and protect their financial future.

Read more »

dividends grow over time
Dividend Stocks

Where I’d Put $8,000 in Canadian Value Stocks for Dividend Income Potential

This TSX value ETF also provides above-average dividends, but there are better options if you look closely.

Read more »

concept of real estate evaluation
Dividend Stocks

1 Undervalued TSX Stock Down 34% to Buy as Housing Costs Surge

Don't let the share price get you down. This undervalued TSX stock could certainly be due for a comeback.

Read more »

A plant grows from coins.
Dividend Stocks

2 High-Yield Dividend Stocks for TFSA Investors

These stocks look cheap today and pay attractive dividends.

Read more »

dividends can compound over time
Dividend Stocks

3 Canadian Dividend Stocks Built to Survive a U.S.-Canada Trade War

If you're looking for dividend stocks that will remain strong no matter the global situation, these look top notch.

Read more »