Canadian investors are looking for good opportunities to add quality dividend stocks to their self-directed Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) portfolios focused on income and total returns.
Enbridge
Enbridge (TSX: ENB) trades near $70 per share at the time of writing, compared to $80 a few weeks ago. The dip is giving investors who missed the big rally over the past three years a chance to pick up ENB shares at a nice discount to the 2026 high.
Enbridge is a good stock to own if you want to get exposure to growth in the American energy sector through a top Canadian firm. The company has focused most of its acquisition spending in recent years on diversifying its asset base, primarily in the United States.
Enbridge spent US$3 billion to buy an oil export terminal in Texas. This was before the wars in Ukraine and Iran disrupted international oil supplies and drove up global demand for Canadian and American oil. In 2024, Enbridge spent US$14 billion to buy three American natural gas utilities. The deals made Enbridge the largest natural gas utility operator in North America and provided a nice complement to the company’s existing natural gas transmission infrastructure that already moved about 20% of the natural gas used by American businesses and households. Demand for natural gas is expected to rise steadily in the next few years as gas-fired power generation facilities are built to provide power to AI data centres.
On the renewables side of the business, Enbridge acquired the third-largest American solar and wind developer in 2022. The division is now building solar and wind power installations for tech firms that want to get as much power as possible from renewable sources as part of their overall electricity buy for the data centres.
At home, Enbridge is a partner on the Woodfibre liquefied natural gas (LNG) export facility nearing completion on the coast of British Columbia. Enbridge also has various other tuck-in infrastructure expansion projects underway.
In total, Enbridge’s current secured capital program spread out across the different divisions is around $41 billion. As the new assets get completed and start to generate revenue, the company expects adjusted earnings and distributable cash flow to rise by roughly 5% per year over the medium term. This should enable the board to continue raising the dividend at a steady pace. Enbridge increased the dividend in each of the past 31 years. Investors who buy ENB stock at the current level can get a dividend yield of close to 5.6%.
Risks
Additional downside is possible in the coming months. Profit taking could continue as investors who bought at the bottom of the last pullback around $44 in late 2023 decide to lock-in gains.
Rising yields in the bond market and risks of interest rate hikes due to rising inflation are also headwinds for Enbridge. The company uses debt to fund part of its growth program, so higher borrowing expenses can reduce profits and cut into cash available to pay down debt or raise dividends.
In addition, Enbridge is facing challenges on its Line 5 pipeline that runs from Michigan to Ontario. The Michigan governor wants to shut down the pipeline, citing environmental risks. Part of the decades-old pipeline runs along the bottom of the Straits of Mackinac, which connects Lake Michigan and Lake Huron.
The bottom line
Enbridge’s current dividend yield pays investors well to ride out near-term turbulence. Further weakness in the share price would be an opportunity to add to the position.
If you have money to put to work in a buy-and-hold dividend portfolio, this stock deserves to be on your radar.
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