In 1995, shares were priced at $4. Today, they’re above $40. You would have made 10 times your money in 25 years. A $100,000 bet would have become $1 million.
But that’s not all. Over that period, Enbridge also paid a consistent annual dividend that yielded above 5%. If you reinvested these dividends, you would have made 20 times your money.
The most incredible thing about this stock is that it rarely has a down year. For the first 20 years of operation, shares never finished the year in the red when factoring in dividends.
Unfortunately, the glory days appear to be over.
Enbridge stock is now worth $42 — the same price it traded at in 2012! Investors have still received the annual dividend, but capital gains have been zilch for nearly a decade.
Oil is dead — or at least it’s dying relative to its former success.
“The COVID-19 crisis forced the biggest slump in oil demand in decades. Demand still hasn’t recovered. It will likely take years to return to baseline,” I wrote last month.
It’s no surprise that Enbridge is struggling right now. Oil is priced at US$40 per barrel. Oil prices were higher in 1974, and that’s not even accounting for inflation!
While the COVID-19 pandemic will eventually pass, the multi-decade headwinds will persist.
“There are long-term pressures too,” I continued. “Regulators and investors are increasing their scrutiny due to climate concerns. This is raising the cost of capital. The fallout is real. Exxon was recently booted from the Dow Jones Industrial Average.”
Oil is no longer king. To be sure, we’ll be using it for centuries to come, but profitability will be harder to come by. As demand enters secular decline, supply continues to surge. While that will fill Enbridge’s pipeline capacity, it’ll also reduce the amount they’re able to charge customers.
If you want to emulate this company’s historical success, you need to look to the future.
Ditch Enbridge for this stock
“Global capital expenditures of exploration and production companies are expected to fall by up to $100 billion in 2020, down about 17% from 2019,” reports the Oil & Gas Journal. Spending is expected to fall in 2021 as well. That’ll hurt Enbridge’s prospects.
Where is spending increasing? In renewable energy.
Over the last five years, $1.5 trillion was deployed worldwide to build renewable energy assets. Over the next five years, investment should total $5 trillion, increasing further in the years ahead.
This is a massive growth opportunity, and the best stock to bet on is Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP).
Brookfield is essentially building the Enbridge of renewable energy. It has a massive portfolio of global infrastructure that produces reliable cash flows for decades at a time. The only difference is that Brookfield has a multi-decade growth runway. Even the regulatory winds are at its back.
Since 2000, Brookfield stock has generated double the return of Enbridge. It also delivers a healthy 4% dividend.
Future-proof your portfolio by ditching fossil fuel stocks like Enbridge for the growth of renewable energy.
Find more stocks like Brookfield below.
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The Motley Fool owns shares of and recommends Enbridge. Fool contributor Ryan Vanzo has no position in any stocks mentioned.