If You’d Invested $5,000 in Pembina Pipeline Stock in 2013, Here’s How Much You’d Have Today

Pembina’s history has been a wild but rewarding ride for investors. Here’s a breakdown.

| More on:
oil and gas pipeline

Image source: Getty Images

In 2013, if you’d ventured into the world of Canada’s oil and gas sector with a $5,000 investment in Pembina Pipeline (TSX:PPL) stock, your portfolio would look significantly different today, albeit for the better.

This sector is a well-known playground for those who understand the cyclical nature of the industry, which oscillates alongside global economic trends and commodity price fluctuations.

Pembina epitomizes the industry’s ups and downs. Its performance over the last decade has been a volatile ride, exhibiting the resilience amid inflationary pressures, but also vulnerability to changes in commodity prices.

Here’s a look at how a historical $5,000 investment in Pembina at the start of 2013 would have worked out nearly 10 years later and how I would invested instead.

The Pembina roller coaster

Here’s the bottom line up front. If you’d invested $5,000 in Pembina at the start of 2013, your investment would have grown to $12,459 by May 2023 for an annualized return of 9.16%. This beat the market, as the benchmark S&P/TSX 60 index only returned an annualized 8.05%.

There is a catch though: volatility. Pembina’s standard deviation was 25.63% compared to the index at 11.87%. In other words, on average the stock experienced ups and downs over twice as steep as the market.

This translated into an overall poorer risk-adjusted return, with Pembina sporting a Sharpe ratio of 0.45 versus the index at 0.64. Objectively, Pembina has been a poorer investment compared to the broad market.

This volatility was put on full display during the 2020 COVID-19 pandemic, which led to unprecedented worldwide lockdowns, significant drops in demand for oil, and plummeting prices. During this time, Pembina experienced a brutal -47.31% drawdown, making 2020 one of its worst years yet.

What I would invest in instead

Given these results, I would not buy a large stake in Pembina. In my opinion, the high volatility of Canadian energy sector stocks requires diversification, at least among a few players if not with other sectors.

A great exchange-traded fund (ETF) alternative to consider is BMO Equal Weight Oil & Gas Index ETF (TSX:ZEO), which holds Pembina, along with nine other leading Canadian oil and gas stocks in equal weights by tracking the Solactive Equal Weight Canada Oil & Gas Index.

Currently, this ETF pays an annualized dividend yield of 5.01% against a 0.61% expense ratio. Overall, I think ZEO is a much better pick for betting on the Canadian oil & gas sector compared to just buying Pembina.

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 Tony Dong has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.

More on Energy Stocks

oil and gas pipeline
Energy Stocks

Why TC Energy Stock Is Down 9% in a Month

TC Energy (TSX:TRP) stock has fallen by 9% in the last month, as it continues to divest assets to strengthen…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

If You Like Cenovus Energy, Then You’ll Love These High-Yield Oil Stocks

Cenovus Energy is a standout performer in 2024, but two high-yield oil stocks could attract more income-focused investors.

Read more »

Man considering whether to sell or buy
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Enbridge now offers a dividend yield near 8%.

Read more »

value for money
Energy Stocks

1 Growth Stock Down 17.1% to Buy Right Now

An underperforming growth stock is a buy right now following its latest business wins and new growth catalysts.

Read more »

Coworkers standing near a wall
Energy Stocks

Why Shares of Parkland Are Rising This Week

Parkland stock is rallying higher as investors expect shareholder calls to take action will create shareholder value.

Read more »

energy industry
Energy Stocks

2 Energy Stocks to Buy With Oil Nearing $90/Barrel

Income-seeking investors can consider adding dividend-paying energy stocks such as Chevron to their portfolios right now.

Read more »

edit Sale sign, value, discount
Energy Stocks

Bargain Hunters: TRP Stock is the Best Dividend Deal Around!

TRP stock (TSX:TRP) offers a high dividend, but is still trading lower than 52-week highs. Now is the best time…

Read more »

Solar panels and windmills
Energy Stocks

So You Own Algonquin Stock: Is It Still a Good Investment?

Algonquin stock (TSX:AQN) was once a top investment for Canadians seeking a high dividend. But after a cut last year,…

Read more »