Enbridge: Stock of the Week

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 are protected against inflation.

For Morningstar, I'm Andrew Willis.

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