But is Enbridge a buy at this point?
Enbridge has increases its debts up to 4.8 times earnings before interest, taxes, depreciation and amortization (EBITDA). The higher leverage ratio is the result of large acquisitions, which have increased turnover but also costs. The purchases have slowed dividend growth to 3% as the company focuses on reducing debt and transitioning to gas pipelines. It expects dividend growth to accelerate to 5% after 2026.
The acquisitions have increased Enbridge’s share price from $40-$60 to $60-$70, reducing the dividend yield to 5.5%. Those who invested in it at a share price of around $45-$50 will continue to enjoy higher returns of over 7.5%. It is a stock you should hold because of the dividend yield. However, it may not be the most attractive dividend stock to buy at its current price of $68.25, just 3% below its 52-week high.
Canada is trying to tap into new export markets amid strained trade relations with the United States. The market has already priced in natural gas export opportunities, leaving little upside for Enbridge’s stock price. However, there is a risk of downside if the tariffs are extended.
The 5.5% yield, slow dividend growth, high debt burden and limited stock price appreciation make Enbridge less attractive at the moment.
A dividend giant to buy Enbridge
A better energy supply alternative for Enbridge in today’s market is Canadian natural resources (TSX:CNQ). Analysts remain bullish on Canadian natural resources, citing strong capital allocation strategy as a key driver of potential upside. The company has operational discipline, strong execution and transparency of capital allocation.
CNQ incorporates the dividend amount into the breakeven price, which on WTI is in the mid-$40s/barrel. This cost advantage, combined with regular share buybacks, ensures that dividends can grow between 2% and 56%.
What determines the amount of dividend growth?
CNQ’s Free Cash Flow Allocation Policy. If net debt exceeds $15 billion, 60% of free cash flow (FCF) is returned to shareholders through dividends and share buybacks. The company’s debt rose to more than $17 billion by 2025 as it acquired more low-depletion reserves and increased production. The increased production led to higher free cash flow, which provided room for dividend growth.
While the capital allocation model appears robust, the success lies in the execution, and CNQ has performed well. Even though oil and gas prices are expected to cool, CNQ is well-positioned to grow dividends through strong double-digit growth in the coming years. The only time dividend growth slowed to low to mid single digits was during the 2015 oil crisis and the Great Financial Crisis of 2009. This shows its resilience to market crises.
Why is Canadian Natural Resources better than Enbridge in today’s market?
Unlike Enbridge, which is tied to a capital-intensive pipeline infrastructure, Canadian Natural Resources has more flexibility in production and distribution. CNQ can sell oil and gas to anyone in the world at competitive rates. Enbridge, on the other hand, focuses only on North America and invests billions of dollars in building pipelines to efficiently transport oil and gas. The lack of flexibility makes it less attractive at high valuations.
While both stocks are fundamentally strong and yield over 5%, CNQ is a better buy due to its higher dividend growth rate. To put it in absolute terms, investing $10,000 in each buys you 218 shares of CNQ and 146 shares of Enbridge. Taking into account a dividend growth of 10% for CNQ and 3% in 2026 and 5% in 2027 for Enbridge, the former will pay higher dividends from 2027.
| Year | CNQ dividend of 1% CAGR | Dividend on 218 CNQ shares | ENB Dividend with a growth rate of 3% and 5% | Dividend on 146 ENB shares |
| 2025 | $2,350 | $512,300 | $3,770 | $550,420 |
| 2026 | $2,585 | $563,530 | $3,883 | $566,933 |
| 2027 | $2,844 | $619,883 | $4,077 | $595,279 |
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