Why did Enbridge shares fall?
Although Enbridge has a low-risk business model, it is vulnerable to geopolitical tensions because it facilitates the export of oil and gas. Oil prices fell to their lowest level in four years ahead of peace talks between Russia, Ukraine and the United States. According to Reuters, the presidents of the three countries will meet this weekend to negotiate peace talks report.
If successful, some US sanctions on Russian oil and gas could be relaxed, creating an oil surplus. An oversupply of oil tends to lower the price. Canada can’t beat the oil prices of Russia and Saudi Arabia.
So far, North America has benefited from sanctions against Russian oil and gas. New markets in Europe and Asia opened up for Canadian oil and gas companies. Enbridge’s stock price also rose from $40 to $60 as the company accelerated capital spending on gas pipelines to capture significant market share in North American liquefied natural gas (LNG) exports. Therefore, any update on the lifting of Russian sanctions will impact Enbridge’s stock price.
Even when the US imposed a 10% tariff on Canadian oil imports in February 2025, Enbridge shares fell 8% and continued to fall 8% during the upcoming tariff talks. The dip came as tariffs would reduce oil volumes shipped to the US. Enbridge management also confirmed that tariffs may not have a short-term impact, but if tariffs are extended, the impact could be significant.
This direct exposure to geopolitical situations causes volatility in Enbridge’s stock price.
Should You Buy Enbridge Stock After 2025 Results?
Now the question: Is Enbridge a buy on the dip? The answer is visible in the 2025 presentation. The rates were not relaxed. Canadian oil exports were adjusted to the 10% tariff. Enbridge found a way around the rate situation. Remember, Enbridge is a strategically important company for Canada’s export-led economy.
The Canadian government wants to diversify its trading partners, and that will cause some chaos in the short term. Change is difficult because it means getting out of your safety net and exploring new opportunities. Enbridge shares will rise and fall in the short term depending on developments surrounding the Russia-Ukraine peace talks.
However, its fundamentals and ability to pay dividends will not be affected. The company has long-term supply contracts and a toll rate that ensures that money flows in. It also keeps the dividend payout ratio in the range of 60-75% of distributable cash flow (DCF).
This DCF is net of debt payments and capital expenditures. For example, the company slowed its dividend growth from 9.9% in 2020 to 3% in the period 2021-2026. Cash flow went to capital expenditures. Enbridge plans to bring $8 billion worth of projects online by 2026, which could boost cash flow. Additionally, it will reduce its debt burden, giving it the flexibility to accelerate dividend growth to 5% from 2027.
With the company’s outlook unchanged, consider buying the stock on the dip if you’re looking for safe dividends.
Final thoughts
The situation between Russia and Ukraine could keep oil and gas stocks volatile in 2026. If you’re a risk-averse investor, there are better dividend stocks out there right now that offer a higher dividend growth rate and lower volatility. Manulife financial is a stock worth considering, as people often find comfort in insurance during times of high risk. It can also give you 7 to 10% dividend growth, considering the twelve-year average annual dividend growth rate of 10.7%.
#Enbridge #Stock #Buy #Results