Stock of the Week: Enbridge

The market’s moving away from the oil sands.

Andrew Willis 12 July, 2021 | 4:28AM
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Andrew Willis: Enbridge was once a rare ‘triple threat’ – a stock offering a high yield, wide moat, and undervalued share price. But that’s changed as a core business of theirs is now they’re under threat – and disproportionately more so than peers.

We can’t give the company a wide moat anymore when oil sands carbon intensity is among the highest of all the oil basins that we cover. And stakeholder challenges related to greenhouse gas emissions make a material difference to our fair value when they can impact every new major project the company embarks on.

And apart from the risks related to the production of oil, we see more struggles ahead on the sales side of the equation. Sector strategist Stephen Ellis notes that buyers of heavy crude – the refineries – are themselves feeling the push for renewable energy as they increasingly look to switch to diesel that’s derived from food waste.

With ESG issues affecting Enbridge from so many angles, we appreciate the company’s investments in hydrogen and other renewable energy – because a lot more may be needed to make those dividends sustainable.  

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enbridge Inc52.75 CAD-0.21Rating

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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