Enbridge (TSX:ENB) recently announced robust earnings alongside a reaffirmation of its long-term growth targets for 2026, which include a 3% increase in distributable cash flow (DCF) and a 4-6% rise in adjusted earnings per share (EPS). However, despite these positive indicators, the company’s stock witnessed a notable decline of 3.3%.
The primary factor driving this downturn appears to be geopolitical volatility. Enbridge’s operational model, while generally considered low-risk, is heavily influenced by international political dynamics, particularly as it is involved in the export of oil and gas. Recent reports indicated that oil prices have plummeted to their lowest levels in four years, coinciding with impending peace negotiations between Russia, Ukraine, and the United States. The discussions, which are set to occur over the weekend, could potentially result in a relaxation of U.S. sanctions on Russian oil and gas, thereby leading to an oversupply that typically suppresses prices. Analysts note that Canada struggles to compete with the pricing of oil from Russia and Saudi Arabia.
Historically, Canada has benefitted from sanctions on Russian energy, opening new markets across Europe and Asia for its oil and gas products. During this period, Enbridge’s stock surged from $40 to $60, as the company ramped up capital investments in gas pipelines, positioning itself to capture substantial market share in North American liquefied natural gas (LNG) exports. Consequently, news of any potential easing of sanctions on Russian oil could have significant ramifications for Enbridge’s market performance.
Compounding the situation, previous tariff implementations, such as the 10% tariff on Canadian oil imports introduced by the U.S. in February 2025, initiated a decline in Enbridge’s stock. The company experienced an 8% drop after this announcement, reflecting investor concerns over reduced oil transmission volumes to the U.S. While management indicated these tariffs might not have an immediate impact, extended tariffs could materialize into considerable challenges for the company.
In light of these geopolitical factors, potential investors are left questioning whether the current dip in Enbridge’s stock price presents a buying opportunity. A close examination of the company’s 2025 performance suggests resilience; despite the ongoing tariffs, Canadian oil exports have adapted to weather the changes. Enbridge’s strategic importance to Canada’s export-driven economy remains intact, and the government is actively seeking to diversify trade partnerships, albeit presenting short-term challenges.
In terms of financial health, Enbridge maintains a solid foundation. The company boasts long-term supply contracts and a consistent toll rate structure that ensures cash flow stability. Its dividend payout ratio is strategically maintained within 60-75% of DCF after servicing debt and capital expenditures. This approach has necessitated a slowdown in dividend growth—down from 9.9% in 2020 to a projected 3% from 2021 to 2026 as cash flow is redirected towards capital projects. Notably, Enbridge plans to introduce $8 billion worth of projects by 2026, promising to bolster cash flow and enhance flexibility for future dividend increments.
While the fundamentals of the business appear to remain strong, market volatility tied to the Russia-Ukraine situation is likely to maintain fluctuations in oil and gas stocks. For risk-averse investors, alternatives with higher dividend growth rates and lower volatility may be more appealing. Manulife Financial, for instance, has been highlighted as a viable option, historically providing a 7-10% dividend growth rate.
In summary, while Enbridge’s stock may present a buying opportunity for those seeking a stable dividend amid current geopolitical uncertainties, investors should also consider other options in the market that may offer less volatility and competitive growth prospects.
