Enbridge: Stock of the Week

If you can’t beat inflation, consider joining it.

Andrew Willis 12 December, 2022 | 4:08AM
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Andrew Willis: With volatility in oil and gas prices persisting, and inflation continuing to pose a challenge for investors, perhaps going to the source of rising prices by – selectively - investing in energy, is still a viable strategy.

Consider Enbridge (ENB), which controls over 70% of Canada’s takeaway oil capacity with its Mainline Pipeline and is relied upon by U.S. refineries. According to sector strategist Stephen Ellis, those refineries are highly complex and value the heavy oil coming from Up North – which effectively secures demand for the near to medium term, even when the U.S. is ramping up its own light oil production.

Recently, we reduced Enbridge’s fair value on challenges around higher capital spending and interest expenses. These developments affect our 2023 outlook but our narrow moat rating remains unchanged, along with our view that excess cash flow could happen by 2026. Today, it’s one of the best Canadian dividend stocks in 2022 and they do have a solid energy portfolio.

With a significant gas utility business in Ontario and a small-but-growing renewables segment that just purchased 7 gigawatts worth of wind and solar capacity, we think over 80% of Enbridge’s earnings [EBITDA] are protected against inflation.

 For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enbridge Inc50.48 CAD0.62Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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