Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
Shares of pipeline giant Enbridge (TSX:ENB) are up about 24% over the past six months. For those who missed out on the big rise must be wondering if this energy stock is still undervalued right now, and if the recent small pullback from multi-year highs is an opportunity to buy this energy stock with 6.4% dividend yield?
Investors started buying Enbridge stock late last year when central banks announced they would stop raising interest rates. Over the past six months, the stock has risen as the Bank of Canada and the Federal Reserve have begun to lower interest rates.
Prior to that, investors were concerned that Enbridge might have to cut its dividend to free up cash to cover higher debt payments as interest rates rose. For years, the pipeline giant has used debt to fund its growth plans, including acquisitions and capital projects.
Inflation in the U.S. has risen over the past few months, and conditions in the job market remain favorable. The Federal Reserve recently said it plans to make two rate cuts in 2025. If Trump takes office and imposes broad-based tariffs on imports, inflation could come back from the dead as companies pass on costs to consumers. In that case, the Fed may have to pause its rate cuts or even raise rates. That could put new pressure on pipeline and utility stocks.
Nonetheless, investors can expect to see Enbridge deliver solid operating results in the coming year. The company completed a $14 billion acquisition of three U.S. natural gas utilities in 2024. Revenues and cash flows from these operations will help propel the company to better full-year results in 2025.
In addition, Enbridge is implementing a C$27 billion capital program. Revenue and cash flow gains will support steady dividend growth as new assets are completed and brought into service.
Enbridge recently raised its dividend, marking the 30th consecutive year of dividend growth for the company. Over the medium term, investors should see continued dividend growth as distributable cash flow is expected to grow by around 3% per annum. At the current share price, the dividend yields 6.4%.
This energy stock could be volatile in the near term until clarity on U.S. tariffs next year, but investors focused on passive income and adhering to a buy-and-hold strategy have a reason to put Enbridge stock on their watch list, and further weakness in the stock price would be a buying opportunity.
