As far as the stock market goes, pipeline companies are about as safe as investors could ask for. The dividends are relatively stable and the Beta is often less than 1.0. Beta is simply a calculation that represents the tendency of a stock’s returns to respond to swings in the general market. It’s determined by dividing the covariance of a stock’s movements and the overall market’s return by the variance of the market’s returns over a period of time. A positive Beta figure lower than 1.0 means a stock will generally move in the same direction as the market trend but more slowly. A Beta higher than 1.0 means a stock tends to be more volatile than the broad market. Enbridge Inc (NYSE: ENB), a large Canadian oil and gas pipeline company, behaves similarly to others like it. It has a Beta has 0.64 according to Google Finance, and pays an attractive dividend yield of nearly 5%.

But just because a stock is stable and pays a good dividend, it doesn’t mean it’s an immediate buy. Enbridge has been a great long-term dividend growth stock and will probably continue to be in the far future. But the pipeline company seems to be currently facing some strong headwinds that has made it fall out of favor with many analysts. One issue seems to be that its growth has dramatically slowed down. Here are the revenues that ENB has generated in the past several years.

• 2013 – $32.9 billion
• 2014 – $37.6 billion
• 2015 – 33.8 billion
• 2016 – 34.6 billion

As we can see, top-line growth does not look particularly exciting for Enbridge. And it’s difficult to growth profits unless there is sales growth. In terms of earnings, Enbridge is expected to make less profit in the fiscal year 2017 than in 2016. According to analysts, the average earnings estimates for Enbridge stock over the next three years show little growth. The estimated EPS for 2018 is about $2.6.

According to Rick Stuchberry, Portfolio Manager, Richardson GMP, rising interest rates in North America can make it harder for companies with debt to operate over time. On September 6, 2017, the Bank of Canada announced the second interest rate hike of the year, increasing the benchmark rate by 0.25% to 1.00%. Stuckberry admits that Enbridge is a high-quality company. But warns that, “the risk is that rates start rising and there is a fair amount of debt on the books. They are professional managers and can handle that kind of debt increase. The issue for them is that in this country we have an anti-pipe attitude. He is worried about the growth on this one. It is well managed although there will be some headwinds on rate rises. He is not in the sector because he does not know where the growth comes from.” Stuchberry currently does not own the stock.

Due to the perception of slower growth, many analysts have downgraded ENB. The stock has underperformed major indices including the Dow Jones, the S&P 500, and the Canadian S&P/TSX Composite. Enbridge’s stock price is down about 8% year to date, while all the mentioned indices are higher.

However, ENB is still a good stock to hold long term. It has increased its dividends for over 20 consecutive years. And over the last 10 years its dividends have increased by 10% annually. Its goal is to continue growing its dividends by 10% every year through 2024. This consistency is what investors like to see. Enbridge has one of the strongest economic moats of any company. Since pipelines require a lot of capital and regulatory approval, it’s not an industry where anyone can easily get in. Much like the railway industry, it’s pretty much an oligopoly without much competition. Currently, Enbridge is trading at roughly $39 USD per share on the NYSE. Given the expected slow growth of the stock over the next few years paying 15 times next year’s earnings seems a bit on the expensive side. I would suggest if one doesn’t already own Enbridge, now wouldn’t be a bad time to start accumulating some shares. But for those who are already long ENB, the best action, for the time being, is to not do anything and just hold the stock for the quarterly dividends. Maybe after a month or two, if the stock price falls below $37 it will be worth taking another look at this dividend paying company.