Daily Stock Pick for September 13, 2023

One of the hottest debates going on right now is whether fossil fuels can ever be entirely phased out.

There’s no denying that renewable energy will only continue to grow…

But whether it will totally eclipse fossil fuels is a point of much contention. 

Based on the prevalence and versatility of fossil fuels (e.g. their use as feedstocks for basic chemicals), I don’t believe that fossil fuels will be phased out anytime soon…

Especially considering that the United States has become a net exporter of oil and gas since 2020.

What’s all that got to do with today’s stock pick?

Well, that’s because investing in today’s pick is basically investing in the future of fossil fuels in North America…

Because this company just spent nearly $15 billion buying more natural gas utilities – essentially tripling down on the future of North American fossil fuels.

And here’s the thing…

News of this acquisition was a negative for the stock – sending it to a two-year low.

But this could be an opportunity…

Because this price drop has sent the company’s dividend yield to nearly 8%…

And with oil prices trending up thanks to production cuts – it might also see healthy capital gains in the future.
So, if you believe – like this company does – that fossil fuels are here to stay (no matter what the “green only” advocates say)

Enbridge Inc. (ENB)

Two days ago, Enbridge reported that it had signed a deal to acquire three U.S. natural gas utilities for $14 billion – comprising $9.4 billion in cash and $4.6 billion in assumed debt. Once the acquisition is complete, Enbridge (which is based in Canada) will have the largest gas utility business in North America.

This is a big, bold bet on the future of North American fossil fuels. As Enbridge’s CEO proclaimed, “We think the future of oil is through and out of North America”.

From a capital gains perspective, Enbridge’s stock has been an underperformer. The nature of the midstream segment that Enbridge operates in is that it is relatively more insulated from the fluctuations in oil prices – which also means less upside when oil prices increase.

But again, that underperformance has created an opportunity, with Enbridge’s dividend yield now standing at a very attractive 7.8%.

Even if the capital gains angle doesn’t play out, now may be a good time to pick up Enbridge stock purely for the dividend alone. Unless, of course, you believe that renewables will complete displace fossil fuels in North America.

To your wealth,
Felix @ Ace of Investing