3 Reasons to Buy Enbridge Stock Today

The Canadian stock market is a lucrative place to invest, as evidenced by, among other things: S&P/TSX Composite Index positive returns in seven of the last 10 years. The financials, materials and energy sectors account for 60% of the total market weight, with technology rapidly gaining ground.

However, there is one name that comes up every time that investors need to pay attention to: Enbridge (TSX:ENB). Canada’s top energy stock is a top pick for North American investors. Additionally, the $119.5 billion pipeline and energy company is the fourth-largest TSX company by market capitalization.

But is now the right time to invest or take a position in a tough sector? Some market analysts have expressed concerns about Enbridge’s debt levels. However, the pros outweigh the cons. I can list three reasons why Enbridge is worth buying today.

Falling interest rates

Falling interest rates are a tailwind for stocks and will reduce corporate debt spending, regardless of the sector. The Bank of Canada (BOC) has cut its interest rate three times this year. On September 23, 2024, BOC Governor Tiff Macklem said more rate cuts could be expected.

The central bank’s inflation target range is 1% to 3%, and the consumer price index fell to 2% in August, its lowest level since February 2021. Macklem said policymakers have already achieved at least some of their main goals. “The timing and pace will be determined by incoming data and our assessment of what that data means for future inflation,” he added.

Stocks with better performance

At the time of writing, 10 of the 11 major TSX sectors are in positive territory. Only the Communication Services sector is in the red. The broad market is up 14.28% year to date, while the Energy sector is up +11.21% (the seventh best performer). However, Enbridge is outperforming both the TSX and the Energy sector. At $54.98 per share, Enbridge’s outperforming return is 21.58%.

In the second quarter (Q2) of 2024, earnings were flat at $1.84 billion compared to Q2 2023, while Distributable Cash Flow (DCF) increased 3% year over year to $2.85 billion. Greg Ebel, Enbridge president and CEO, said, “During the quarter, we made significant progress in executing on our strategic priorities. The scale and connectivity of our operations expand growth opportunities across our four business franchises.”

Ebel added that disciplined capital allocation remains a key focus for management. He also mentioned that the positive rating agency rating confirms the strong balance sheet. More importantly, Ebel said Enbridge’s leverage is within its target range. The company can fully fund its $25 billion secured capital portfolio.

Excessive dividend

The oversized dividend is the third compelling reason to invest in Enbridge. If you invest today, the dividend yield is 6.67%. In addition to its nearly seven-year dividend history, the large-cap stock is a Dividend Aristocrat due to its 29-year record of consecutive dividend increases.

Enbridge’s financial stability is driven by its diversified, low-risk pipelines and utility-like earnings. Ebel concluded, “A well-supported dividend and demonstrable growth are expected to deliver low-double-digit annual shareholder returns for many years, making us a top investment opportunity.”