Oil is so 1990s. Commodities in general and fossil fuels, in particular, have gone out of favour among most investors today, for good reason.
A rise in the importance of environmental, social and governance (ESG) mandates at various large institutional investors has shifted the focus away from a “profitability at any cost” goal to one of focusing on combining economic and social benefit to promote the greater good of society.
Enbridge Inc. (TSX:ENB)(NYSE:ENB) finds itself in the energy transportation business, one which is directly tethered to the oil and gas sector in North America. This reality has led to a dearth of investor interest in Enbridge, leading some to classify this company as a contrarian play alongside the company’s upstream and downstream counterparties.
Those looking to reduce exposure to the oil and gas sector have continued to sell down positions in anything related to these commodities, providing a large amount of near term downside pressure for investors bullish on companies like Enbridge.
That said, I do think Enbridge makes a nice contrarian pick for income investors today. The company’s mid-single digit dividend yield is supported by assets which are in increasing need and are becoming very difficult to replicate, particularly from an environmental standpoint.
The ability of Enbridge as one of the largest players in this sector, to acquire and consolidate other energy and structural assets provides room for growth, as does Enbridge’s long-term pricing power and its size. For those seeking safe, reliable income with less concern about near term capital appreciation, Enbridge is a great long-term choice.
Invest wisely, my friends.
