I typically focus my energy on my top pick in the energy infrastructure space, Enbridge Inc. (TSX:ENB)(NYSE:ENB). Another great option is Pembina Pipeline (TSX:PPL). Investors should keep on this pick on their watch list, particularly now.
The energy sector is one many investors have steered clear of. Vast swathes of institutional money have exited the sector due to ESG reasons or otherwise. That said, this move away from the energy sector has made valuations of various energy infrastructure companies and other companies with indirect exposure to oil prices come down drastically. This is due in large part to significant counterparty risk which is now being priced in.
Pembina, like Enbridge, holds a majority of its contracts with the highest quality producers and has very favourable contract terms, significantly reducing this risk. With oil prices rebounding to more reasonable levels, these risks are further reduced. Additionally, pipeline capacity, particularly in Canada, remains constrained. This means Pembina’s pipelines can be expected to be full for a very, very long time. Pembina is a solid, stable long-term investment for investors with various risk tolerances and investment goals, due to the company’s mid-single-digit dividend yield and excellent operating fundamentals and valuation.
This reality makes the company’s cash flows easier to forecast and highlights the significant value that is on the table for investors willing to nibble at these levels, or at least watch from the sidelines.
Invest wisely, my friends.
