In investing, most people choose to focus either on stock price appreciation or on generating income from dividends. To be fair, that dynamic exists because it's typically something of a zero-sum game. The better a stock is at delivering returns on one of those fronts, the worse it usually is on the other.
However, there's a sweet spot of companies that not only can outperform the broader market on share price gains, but also distribute meaningful dividend payments. One such potential opportunity in the energy sector right now is Enbridge (ENB 0.76%).
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Enbridge is an "all of the above" energy provider, with operations in natural gas transmission, liquid pipelines, gas utilities, and renewable energy.
"Global energy demand is growing and will require all forms of energy," CEO Greg Ebel said in a March 2025 company update. "Enbridge's diversified infrastructure footprint is uniquely positioned to meet this demand, delivering a balance of oil, natural gas and renewable power across 5 countries, 43 states, and 8 provinces."
At the current share price, its dividend yields a generous 5.2%, and the stock has had a strong run over the last year. Shares are currently near a 52-week high, making it worth considering as it tests a breakout higher.
Today, we'll look at the upside potential and important factors to consider before making an investment decision.
Powering the future
Demand for power across the U.S. is only growing.
From 2025 to 2040, consulting firm McKinsey & Co. projects U.S. power demand will increase by 3.5% annually, with new data centers contributing significantly to that demand.
Enbridge is positioning itself to meet the needs of businesses and retail customers alike. For example, it's building a solar facility in Texas that is expected to be operational next summer, and Meta Platforms has signed a contract to buy all of the electricity it produces.
NYSE: ENB
Key Data Points
Its gas distribution and storage business has a strong foothold across North America. Enbridge is the largest natural gas distribution company in Canada, where it serves more than 4 million customers. It's also the largest natural gas distributor in Utah, serving 90% of the state's population.
In its Q4 2025 earnings presentation, management shared that it foresees $50 billion in potential opportunities through 2030 across all its divisions.
What to consider before investing in Enbridge
Broadly speaking, Enbridge faces many of the same risks as other energy providers, including the possibility of extreme weather disrupting operations, regulatory constraints, and geopolitical risk. But there are also company-specific issues.
When it comes to the dividend payout, investors need to be aware of Enbridge's 117% payout ratio: It's distributing more in dividends than it's earning on a GAAP (generally accepted accounting principles) net income basis. However, it's able to do that because a significant portion of its GAAP expenses come from depreciation and amortization, which are non-cash expenses. On a distributable cash flow basis, its ratio is more reasonable, and the energy company has a positive track record: It has paid dividends for over 70 years and has a streak of 31 years of consecutive dividend increases.
Still, anyone who becomes a shareholder will want to pay attention to its payout ratios and listen to management's views on the dividend's sustainability during earnings calls.
In terms of valuation, Enbridge has a forward price-to-earnings ratio of 23.5, suggesting investors expect continued growth and are willing to pay up for it. That may be a turnoff for some who are more accustomed to lower ratios in the energy sector.
In terms of stability, this isn't a stock that gets whipped around. Its beta of 0.8 means it's less volatile than the broader markets.
Overall, Enbridge's stock price can climb as the business capitalizes on rising energy demand, but it can also continue to pay its shareholders a generous dividend. Combined, for long-term investors, there's significant potential for profitable total returns from here.
