Why I'm Selling Enbridge Stock and Other Pipeline Companies

Why I’m Selling Enbridge Stock and Other Pipeline Companies

Pipeline companies like Enbridge (TSX:ENB)(NYSE:ENB) stock have not been impressive these last few years. That’s why I’m selling and moving elsewhere.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published April 20, 2022 3:00 pm EDT

When I first got into investing, the first place I was practically demanded to go were oil and gas companies. These were supposed to be some of the most stable companies an investor like me should purchase right away. That included Enbridge (TSX: ENB)(NYSE: ENB).

Enbridge stock was an obvious choice. It provided me with a solid dividend and long-term cash flow from its contracts. It has pipelines across North America, shipping oil and gas to every corner of the globe.

But these days, I’ve started selling Enbridge stock and other pipeline companies. Why? Let’s get into it.

oil and gas pipeline — Image source: Getty Images

Enbridge stock was out first

I sold Enbridge stock when it reached 52-week highs this year. And, frankly, I was impatient to do so. When I first bought the stock, it had a target price of $60. This was years ago. That share price still hasn’t been reached, even as I’m writing. Instead, Enbridge has all but flatlined when it comes to returns — returns that I thought would be all but guaranteed given its track record.

Then there’s the dividend. It’s a solid one, I’ll grant you. However, Enbridge stock has started to slow down its dividend growth over the last few years. What was once supposed to be annual growth between 8% and 10% has gone down to 3% over the last two years.

And then, there are the company’s future growth opportunities. While Enbridge stock may have a lot of growth planned in the books, it’s seeing it through that’s the problem. Social and environmental activism has put a halt to growth plans again and again. Furthermore, countries are getting on board with clean energy solutions more than ever. Enbridge’s response? It’s to create renewable natural gas from waste. That’s a baby step when we need a leap.

What about other pipeline companies?

I also recently sold my shares in Pembina Pipeline (TSX: PPL)(NYSE: PBA) after Enbridge stock. This one was a bit harder to take, as the company has done more than Enbridge when it comes to shifting towards clean energy solutions. Pembina is working with Alberta for a carbon–capture program, using its pipelines to transfer and store carbon for lower greenhouse gas emissions.

But the problem still remains: what about the future? Both Enbridge stock and Pembina stock have the same problem. They need to use their pipelines and have a plan to transfer completely over to renewable and clean energy. They both have so much land that could be used for this purpose. And that would create long-term income for their investors.

Foolish takeaway

Enbridge stock still has one of the top dividends out there. But I’m not sure how long it can last. The war in Ukraine has shown that dependence on foreign oil should no longer be an option. It’s moving European countries in a serious way to develop clean energy programs. And North America will likely follow suite.

That’s why I’m preparing now. I want growth from the future, not slowing returns from the past. That is why I’m selling Enbridge stock and other pipeline companies today.