1 TSX Oil Stock Is Building Wind Farms

A top TSX stock, Enbridge Inc (TSX:ENB)(NYSE:ENB) is investing in renewable energy projects such as solar and wind technology with powerful partners.

| More on:
Solar panels and windmills

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

When Canadian investors think about Enbridge (TSX:ENB)(NYSE:ENB) stock, they do not normally think about its renewable energy portfolio. This energy infrastructure firm may best be known for transporting 2.2 million barrels of oil per day. Enbridge also distributes natural gas through Enbridge Gas Distribution and Union Gas.

Nonetheless, this energy infrastructure firm has invested in 21 wind farms, four solar energy plants, and five waste heat recovery facilities. More recently, Enbridge announced a partnership with EDF Renewables and WPD to construct an offshore wind farm in Fécamp, France:

The renewable energy portfolio at Enbridge can generate 1,991 MW of energy to power almost 900,000 homes. Since Enbridge is taking the initiative to innovate through renewable energy technology, this energy stock may be a good buy in 2020.

Enbridge underperforms TSX index

So far, Enbridge has failed to impress investors throughout 2020. The stock has lost 12.86% of its market value year to date. By comparison, the S&P/TSX Composite Index level percentage change is only -7.06%.ENB Chart

Normally, investors might prefer stocks with a demonstrable history of outperforming the market average percentage change. Especially during a bear market, savers interested in stashing cash in value or income stocks typically want to see stronger market performance than the index.

Further, Enbridge hasn’t experienced strong price performance during bull markets either. Over the last five years, Enbridge has lost 23.91% of its market value. Meanwhile, the S&P/TSX Composite Index level percentage change is a positive 5.58%.

ENB Chart

The lack of long-term price stability makes Enbridge a risky purchase for any Canadian saver or investor. The 7.2% dividend yield at the current share price of $44.99 is little compensation for the price and liquidity risk.

Will luck turn around for Enbridge stock?

Hopefully, Enbridge shareholders can expect to see the COVID-19 stock market lift the price of shares in Enbridge stock. If the company continues to invest in renewable energy, then investors may start seeing greater profit potential from this asset.

In other words, Enbridge needs to decrease its reliance on oil for revenue and build its portfolio of alternative energy sources. In this way, it can rebrand itself as a company with higher growth prospects.

Oil and natural gas are quickly being replaced with cleaner, more sustainable energy sources like wind and solar power. If the company wants to keep pace in the energy market over the next decade, it will need to replace oil and natural gas projects with more innovative technology.

Should you invest in Enbridge stock?

Investing in Enbridge stock today is a risky choice. We don’t know how efficiently the company will produce clean energy. Moreover, it is still unclear how quickly the company can build its renewable resource portfolio.

On the bullish side, Enbridge stock was showed some strong upward momentum during the second half of 2019. Before the March downturn, shareholders traded the stock for over $56 per share. The energy stock may not have much downside risk from here.

ENB Chart

Whether you want to take a risk on Enbridge stock and its budding renewable energy portfolio is ultimately your decision. If you do purchase stock in this company, consider selling an out-of-the-money call option to hedge your position.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

2 Low-Risk Growth Stocks Paying Great Dividends

These top TSX dividend stocks give investors exposure to interesting growth opportunities.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Got $300? 2 Simple TSX Stocks to Buy Right Now

These two simple TSX stocks have everything a long-term investor looking to dollar cost average into a position wants right…

Read more »

A golden egg in a nest
Dividend Stocks

Millennials: No Excuses! Start Saving for Retirement Right Now.

Millennials, we need to stop complaining and start bragging. We're great savers, so it's time to start investing in TSX…

Read more »

Value for money
Dividend Stocks

3 UNDERVALUED TSX Stocks to Buy in August

Here are some attractively valued TSX stocks for the long term.

Read more »

A young man throwing and catching his daughter above his head
Dividend Stocks

Parents: Double Your CCB Payments This Month!

Parents can use those CCB payments to their benefit and double them this year month after month -- no waiting,…

Read more »

stock market
Dividend Stocks

I’m Buying These 3 Resilient Stocks During a Bear Market

TD Bank stock is among the three stocks I'm buying to protect my portfolio from a bear market and to…

Read more »

edit Safety First illustration
Dividend Stocks

4 of the Safest Dividend Stocks on Earth Right Now

These dividend stocks offer up strong dividends, a cheap share price, and safety from growing, safe sectors of the market.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Change Your Future: What to Hold in a TFSA in 2022

Holding dividend growth stocks in a TFSA long-term can change the financial futures of worried Canadians.

Read more »