When investing, most people choose to focus on stock price appreciation or generating income from dividends. To be fair, that dynamic exists because it’s typically a kind of zero-sum game. The better a stock is at generating returns on one of those fronts, the worse it usually is on the other.
However, there is a sweet spot of companies that can not only outperform the broader market in share price gains but also distribute significant dividend payments. One of those potential opportunities in the energy sector right now is Enbridge(NYSE: ENB).
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Enbridge is an “all of the above” energy provider, with operations in natural gas transmission, liquids pipelines, gas utilities and renewable energy.
“Global energy demand is growing and will require all forms of energy,” CEO Greg Ebel said in a March 2025 company update. “Enbridge’s diversified infrastructure is uniquely positioned to meet this demand, delivering a balance of oil, natural gas and renewable energy across 5 countries, 43 states and 8 provinces.”
At the current share price, its dividend yields a generous 5.2% and the stock has been on a strong run over the last year. The stock is currently close to a 52-week high, so it is worth considering as it tests a breakout to the upside.
Today we will discuss the upside potential and important factors to consider before making an investment decision.
The demand for energy throughout the United States is only growing.
From 2025 to 2040, consulting firm McKinsey & Co. projects that energy demand in the United States will increase 3.5% annually, and new data centers will contribute significantly to that demand.
Enbridge is positioning itself to meet the needs of both enterprise and retail customers. For example, it is building a solar facility in Texas that is expected to be operational next summer, and Metaplatforms has signed a contract to buy all the electricity it produces.
Its gas distribution and storage business has a strong presence throughout North America. Enbridge is Canada’s largest natural gas distribution company, serving more than 4 million customers. It is also the largest natural gas distributor in Utah, serving 90% of the state’s population.
In its Q4 2025 earnings presentation, management shared that it anticipates $50 billion in potential opportunities through 2030 across all of its divisions.
Broadly speaking, Enbridge faces many of the same risks as other energy providers, including the possibility of extreme weather conditions disrupting operations, regulatory restrictions and geopolitical risks. But there are also company-specific issues.
When it comes to dividend payments, investors should be aware of Enbridge’s 117% payout ratio – it’s distributing more dividends than it earns based on GAAP (generally accepted accounting principles) net income. However, it can do so because a significant portion of its GAAP expenses come from depreciation and amortization, which are non-cash expenses. On a distributable cash flow basis, its ratio is more reasonable and the energy company has a positive track record: It has paid dividends for over 70 years and has a 31-year streak of consecutive dividend increases.
Still, anyone who becomes a shareholder will want to pay attention to its payout ratios and listen to management’s views on the sustainability of the dividend during earnings calls.
In terms of valuation, Enbridge has a Forward P/E ratio of 23.5, suggesting investors expect continued growth and are willing to pay for it. This may discourage some who are more accustomed to lower ratios in the energy sector.
In terms of stability, this is not a stock to get carried away with. Its beta of 0.8 means it is less volatile than the broader markets.
Overall, Enbridge’s stock price can rise as the company capitalizes on growing energy demand, but it can also continue to pay its shareholders a generous dividend. All in all, for long-term investors, there is significant potential for profitable total returns from here.
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Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has posts on Enbridge and recommends it. The Motley Fool has a disclosure policy.
Should you buy Enbridge while it is below $60? was originally published by The Motley Fool
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