Key Takeaways
- Shares of Enbridge, the oil and gas transportation leader with pipelines in 31 states, hit a high of $44.74.
- ENB is a Dividend Aristocrat, with a dividend yield of almost 6% and 30 straight years of dividend growth.
- ENB stock is relatively overvalued, trading at a trailing 12-month enterprise value to EBITDA of 17.18x.
Enbridge Inc. ENB soared to an impressive intraday high of $44.74 per share in the last trading session, hitting a 52-week high. The surge reflects investor enthusiasm for the midstream giant's secured projects in liquids pipelines, gas transmission and renewable power generation. These ventures are poised to fuel Enbridge's robust core earnings and fortify its leadership in energy infrastructure.
The key question now is whether investors should capitalize on the momentum. Before offering anyinvestment advice let's first take a closer look at the company’s fundamentals.
ENB’s Resilience & Visionary Pipeline Sparks Expansion
Enbridge is a leading midstream energy player in North America, operating an extensive crude oil and liquids transportation network spanning 18,085 miles — the world's longest and most complex system. ENB’s gas transportation pipeline network spans 71,308 miles, covering 31 U.S. states, four Canadian provinces and offshore areas in the Gulf of Mexico.
Enbridge’s pipelines transport 20% of the total natural gas consumed in the United States. The company generates stable, fee-based revenues from these midstream assets, as they are booked by shippers on a long-term basis, minimizing commodity price volatility and volume risks.
The midstream energy major generates incremental cash flows from its C$27 billion backlog of secured capital projects, which include liquids pipelines, gas transmission, gas distribution and storage, and renewables. The maximum in-service date is 2029.
ENB’s Strong Dividends and Growing DCF Enhance Appeal
Enbridge prioritizes returning capital to shareholders, as evidenced by 30 consecutive years of dividend growth, earning its status as a dividend aristocrat. Currently, ENB offers a dividend yield of almost 6%, which is higher than the 5% of the composite stocks in the industry.
Considering its substantial backlog of midstream growth projects, Enbridge is expected to continue rewarding shareholders with attractive dividend payments. The company expects its distributable cash flow (DCF) per share from 2021 through 2025 to witness a compound annual growth rate of 4%. This increase indicates that Enbridge is well-positioned to sustain and grow its dividend payouts.
Image Source: Enbridge Inc.
Time to Bet on ENB?
Enbridge recently unveiled its impressive 2025 financial guidance, underscoring the company’s remarkable growth trajectory. Leveraging its robust portfolio of secured projects in liquids pipelines, gas transmission and renewable power generation, the midstream energy powerhouse anticipates achieving a solid adjusted EBITDA in the range of C$19.4 billion to C$20 billion. This reflects a stellar 9% rise from the midpoint of its 2024 recast guidance and an impressive 17% leap from the original 2024 projection.
This remarkable growth reaffirms Enbridge’s strategic brilliance and its leadership in delivering energy solutions to meet global demand, a success mirrored in its stock performance. Over the past year, Enbridge shares have surged 30.6%, significantly outperforming the 18.2% gain of the energy sector’s composite stocks.
One-Year Price Chart
Image Source: Zacks Investment Research
However, several challenges engulf the stock and may impede its growth. While Enbridge is expanding into renewables, a significant portion of its revenues still depends on conventional oil and gas operations, which face long-term regulatory and environmental challenges. Also, the company has outlined plans to invest $7 billion in capital during 2025, a strategy that could weigh on resources if the anticipated returns face delays.
Enbridge is also currently considered relatively overvalued, trading at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 17.18x. This figure surpasses the broader industry average of 15.33x. It is higher than other major midstream companies such as Kinder Morgan Inc. KMI and Enterprise Products Partners LP EPD, which trade at 14.74x and 10.63x EV/EBITDA, respectively.
Image Source: Zacks Investment Research
Therefore, while the company’s long-term outlook is strong and some investors may be willing to accept the premium, caution is warranted given the concerns associated with the stock. Instead of rushing to add ENB, carrying a Zacks Rank #3 (Hold), it may be prudent to wait for a more advantageous entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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