The oil and gas sector was an industry that all investors wanted to avoid in 2020 as the pandemic resulted in diminished demand for underlying commodities. With air travel virtually nonexistent and most people staying at home, it led to the entire energy sector undergoing massive losses.
Even the top companies in the Canadian energy sector, such as Enbridge (TSX:ENB)(NYSE:ENB), suffered massive losses. The year 2020 was a year to forget for investors interested in Enbridge stock and its peers. The increasing vaccine rollout and hopes of reopening economies led to an uptick in demand for crude oil, and the energy sector has enjoyed a strong start to 2021.
With year-end just a few months away, today I will discuss Enbridge stock to help you determine whether it could be a worthy addition to your investment portfolio right now.
The company reported stellar figures in its second-quarter earnings report for fiscal 2021. The company has been taking advantage of the current tailwinds for the industry and seeing a considerable boost in its financials. The demand for Enbridge’s services is directly proportional to the rising demand for crude oil. The surge in demand for oil means more business and greater cash flows for the pipeline infrastructure company.
Despite the excellent news for the company, there may be some concerns that investors should be aware of as they could affect the company’s long-term prospects depending on how the situation develops.
The pipeline situation
Enbridge stock appears to have everything going right for it, making it an attractive asset to buy right now. However, there may be a few risks that you should be aware of before you decide to invest in its shares.
The company’s Line 5 replacement project could become a problem for the company in the long run. The pipeline has been ruled by authorities in the U.S. to be safe. Currently, there are no signs to indicate the possibility of the pipeline being shut down. However, the pipeline’s replacement tunnel housing continues to be delayed, resulting in lost income for the pipeline company.
The Dakota Access Pipeline was allowed to continue running by a U.S. federal judge, but the pipeline could be shut down if the Environmental Impact Statement does not deliver favourable news.
However, both pipelines look secure right now, and Enbridge could continue generating significant long-term profits from them.
If you’re just starting the investing journey, Enbridge stock could be an excellent asset to add to your portfolio to build a strong foundation. While things were tough for the energy sector giant last year, the situation thus far in 2021 makes it seem like an attractive long-term buy for you to consider for your investment portfolio.
Enbridge stock has long been a favourite among dividend-seeking investors. Barring a few potential hiccups along the way, it could be a solid long-term investment for you to hold in your portfolio for several decades.
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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.