With Donald Trump set to return to the White House in January, the energy sector is facing some big questions, and Enbridge Inc. (ENB) is right in the middle of it all. As one of the largest energy infrastructure companies in North America, Enbridge’s future could be shaped by changes in trade policies and energy dynamics during Trump’s second term.
Trump's proposed 25% tariff on Canadian imports to the U.S. has already caused a stir, especially since Canada supplied over half of all petroleum imported to the U.S. in 2023 — about 4.42 million barrels per day. A tariff like this could hit companies like Enbridge hard, particularly with its Mainline pipeline system being the largest oil pipeline network on the continent.
Enbridge has proven it can weather tough times. The company recently shared its 2025 financial outlook, expecting adjusted EBITDA between $19.4 billion and $20 billion and distributable cash flow per share of $5.50 to $5.90. It also announced its 30th straight annual dividend increase — a 3% bump to $3.77 annually starting March 2025.
But there’s still uncertainty about how Trump’s trade policies might affect Enbridge’s growth and its ability to hold onto its “Buy” rating during these unpredictable times. Let’s take a closer look at Enbridge’s financials and market position to see how it might navigate these challenges in the years ahead.
Analyzing Enbridge’s Financial Health
Enbridge, one of North America’s largest energy infrastructure companies, runs a vast network of pipelines for crude oil, natural gas, and renewable energy projects. Its business model is built around transporting energy efficiently, generating steady cash flow, and maintaining its strong dividend payouts.
The proposed tariffs, however, could be a challenge for Enbridge’s profitability. As a key player in cross-border energy trade, higher tariffs on Canadian crude oil entering the U.S. might increase costs and squeeze margins. Even so, Enbridge’s stock has shown resilience in 2024.
Year-to-date, it’s up 15%, climbing from $36.02 to a peak of $44.13 in December before pulling back slightly to $41.55. While the past month saw a dip of 1.5%, the stock still reflects investor confidence.
Financially, Enbridge reported strong third-quarter results with GAAP earnings of $1.3 billion ($0.59 per share), up from $0.5 billion ($0.26 per share) last year. Adjusted earnings were slightly lower at $1.2 billion ($0.55 per share) compared to $1.3 billion ($0.62 per share) in 2023 due to higher financing and depreciation costs from recent acquisitions. However, EBITDA rose by 8% to $4.2 billion, showcasing operational efficiency.
Enbridge’s valuation shows a market capitalization of $91 billion and a forward P/E ratio of 21.42x, well above the sector average of 12.08x — suggesting investors are willing to pay a premium for its stability and growth potential. Still, tariffs remain an unpredictable factor that could test the company’s financial strength and investor sentiment in the coming year.
Key Drivers Behind Enbridge’s Success
Enbridge’s recent moves show why it continues to hold strong despite outside pressures like potential tariffs. Its partnership with Microsoft (MSFT) to use artificial intelligence (AI) is a clear example of its forward-thinking approach.
By using AI tools like the Energy Optimizer, Enbridge is improving efficiency, cutting greenhouse gas emissions, and boosting the safety of its pipelines. This digital transformation, built on a solid cloud foundation, helps Enbridge stay ahead in sustainable energy transport and could offset some of the cost pressures from tariffs by streamlining operations and reducing expenses.
At the same time, Enbridge is investing $700 million in the Gulf of Mexico’s Kaskida development, which includes building the Canyon Oil and Gas Pipeline Systems. These pipelines are expected to start running by 2029 and will provide steady cash flow through long-term contracts with BP (BP). This project not only strengthens Enbridge’s presence in the Gulf but also fits its low-risk, utility-like business model, helping it stay resilient against market challenges.
On top of that, Enbridge’s dividend remains a major draw for investors. With an annual yield of 6.4%, well above the energy sector average of 4.24%, it’s a favorite for income-focused investors.
However, its forward payout ratio of 122.44% raises concerns about whether such high payouts can be sustained if tariffs increase financial strain. While dividends are a key part of Enbridge’s appeal, keeping them at this level under rising costs could test the company’s flexibility.
What Analysts Are Saying About Enbridge
Looking ahead, Enbridge seems to be on a good path financially. The company has confirmed its 2024 goals, expecting to end the year near the top of its EBITDA range of $17.7 billion to $18.3 billion.
Analysts are also fairly optimistic, with a "Moderate Buy" rating from 16 experts. Out of these, five say "Strong Buy," two recommend "Moderate Buy," eight suggest holding, and one advises selling.
The average target price is $44.18, suggesting a small increase from its current price — a potential gain of about 6%. This cautious optimism reflects analysts' belief in Enbridge's ability to handle tariff challenges while benefiting from strategic moves and a strong dividend policy.
RBC Capital Markets recently raised its target price for Enbridge to 63 CAD, roughly $44, citing a positive outlook for 2025 due to strong Mainline volumes and favorable currency rates. This shows RBC's confidence in Enbridge’s ability to tap into North American energy trends, which should support ongoing growth in earnings, cash flow, and dividends. Similarly, CIBC upped its valuation forecast for Enbridge, pointing to strategic acquisitions and infrastructure investments as key future earnings drivers.
Conclusion
In the face of potential tariffs, Enbridge’s strong fundamentals, strategic growth initiatives, and reliable dividend policy suggest it’s not a stock to count out just yet. While trade tensions could create headwinds, its innovative partnerships, expanding infrastructure, and steady financial outlook provide a solid foundation that analysts and investors alike continue to recognize. Whether tariffs will truly derail the company remains uncertain, but the prevailing sentiment is that Enbridge has the resilience to maintain its status as a solid investment choice in 2025.
