Enbridge (TSX:ENB) is up 30% in the past year. Investors who missed the rally are wondering if ENB stock is still attractive and good to buy for a self-directed Tax-Free Savings Account or Registered Retirement Savings Plan (RRSP) focused on TSX stocks that offer high dividend yields.
Enbridge share price
Enbridge trades near $63 per share at the time of writing. The stock has been in a range of $45 to $65 over the past 12 months.
Interest rates have been the main story for pipeline and utility stocks over the better part of the past three years. Enbridge traded at around $59 in June 2022. The stock then went into an extended slide as the Bank of Canada and the U.S. Federal Reserve aggressively raised interest rates to get inflation under control.
Enbridge started to recover in late 2023 when the central banks indicated they were done raising interest rates. At that point, investors began to bet on rate cuts that eventually materialized in the second half of 2024, helping spark a new rally in the energy infrastructure space.
Looking ahead, the rate outlook is getting foggy. Canada will likely continue to cut interest rates to help the economy adjust to the trade war with the United States. This will likely occur even as inflation moves higher. At some point, however, the central bank might have to put the brakes on rate cuts if inflation soars.
In the United States, the central bank is now on hold as it waits to see how inflationary the widespread tariffs will be as businesses pass through cost increases to consumers. If the American economy holds up and inflation spikes, the Federal Reserve could be forced to raise interest rates. In that scenario, Enbridge and other utility stocks could come under new pressure.
Enbridge has expanded its American assets in recent years. The company spent US$14 billion in 2024 to buy three American natural gas utilities. Enbridge has also added an oil export terminal in Texas and purchased a U.S. developer of renewable energy projects.
Opportunity
Oil production is rising in Canada and the United States. Enbridge moves about 30% of the oil produced in the two countries. On the natural gas side, Enbridge transports about 20% of the natural gas used in the United States and now has a larger gas distribution utility footprint. Natural gas demand is expected to increase in the coming years as gas-fired power stations are built to supply electricity to artificial intelligence data centres.
Enbridge is working on a $26 billion capital program that will help boost revenue and cash flow. This should support ongoing dividend growth. Enbridge has increased the dividend for 30 consecutive years. At the current share price, investors can get a yield of 6%.
Enbridge has the financial clout to make large acquisitions to drive additional growth. New pipeline opportunities could also emerge in Canada as the country looks for ways to defend itself against economic aggression from the United States.
Should you buy ENB stock now?
Enbridge has had a big run in the past year, so I wouldn’t back up the truck. A pullback wouldn’t be a surprise in the coming months, especially with all the uncertainty around the potential trade war.
Income investors, however, might still decide to buy at this level. The dividend should be safe and you get paid well to ride out any new turbulence in the market. The downside would be an opportunity to boost the position for a buy-and-hold portfolio.