Energy stocks? Yes, that’s right.
Growth investors look away: here are three picks long-term investors will love in their portfolios for the new decade.
Enbridge is a highly integrated energy infrastructure company, and while most investors focus on the obvious core business of pipelines, Enbridge has invested in both upstream and downstream operations, making this company well-insulated against sector-wide issues that may otherwise adversely affect other companies to a disproportionate degree.
The company currently carries a dividend yield of 6.2%, making this a dream investment for a long-term, income-oriented investor.
The company’s 3.8% yield is nothing to sneeze at and a great play for investors betting on a continued rebound of Western Canadian Select (WCS) prices relative to West Texas Intermediate (WTI) and Brent pricing.
The price gap between these various types of oil (heavy vs. light) has decreased recently, although the gap still means Canadian producers are paid significantly less for their oil than other global producers.
If pipeline delays get sorted out, and crude begins to flow more freely from Canada’s Western Provinces in 2020, Suncor could see a big boost, making investors very happy. For now, however, being paid 3.8% to wait isn’t bad.
For those concerned about having too many energy assets centred only in Canada, Canadian Utilities Limited (TSX:CU) is actually a great play.
The company is well diversified from a geographical perspective — one that’s built to take advantage of growth in North American energy activity and something most investors would agree is a great long-term play.
The company has assets across a range of utilities businesses, making this an excellent diversification play from a sector standpoint as well. Canadian Utilities currently carries a dividend yield of 4.4% at the time of writing.
The energy sector has been hit hard in recent years, with technology and other growth stocks producing gains that have taken much of the spotlight away from stocks that would otherwise be considered boring or simply not worth the time to investigate.
After all, for any investor able to double their money in short periods with investments in some of Canada’s best tech stocks, or in the Canadian cannabis sector (though that has imploded), considering energy or utilities companies like the one’s I’m about to talk about would seem ludicrous.
That said, it’s important for long-term investors to consider such companies, particularly because they are outside of the limelight.
Looking for value is always important, and though value investments have indeed trailed growth investments significantly over the past 10 years, in the long run, Foolish (with a capital F) investors ought to keep their eyes on the prize and remember that value performs better over very long periods than growth.
Stay Foolish, my friends.
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The Motley Fool owns shares of and recommends Enbridge. Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.