Stock Strategist: Enbridge's Sell-Off Looks Exaggerated

[Morningstar Logo]( [Company Site]( [Company News]( [Membership]( [Portfolio]( [Stocks]( [Options]( [Funds]( [ETFs]( [Markets]( [Tools]( [Personal Finance]( [Discuss]( Stock Strategist Enbridge's Sell-Off Looks Exaggerated The market is underestimating long-term cash flows once oil prices normalize. [tab_bar] by Joe Gemino, CPA | 4/20/2020 5:30:00 PM Wide-moat and 5-star-rated Enbridge [ENB]( remains one of our top picks in the energy sector, as we think the market is mistaken about the future of the company’s cash flows. However, we don’t expect the market’s concerns will be fully addressed for some time, which can lead to volatile swings in the stock. We advise investors to stay the course while getting paid a handsome 8.4% dividend yield. In the end, we believe Enbridge’s long and winding road will lead to 40% upside. Before the downturn in the financial and oil markets, we saw evidence that the stock market was beginning to appreciate Enbridge’s ability to generate long-term sustainable cash flows and offer a healthy, safe dividend. The stock appreciated nearly 25% from September 2019 until the beginning of the downturn in the markets in February. It also outperformed the general market and its top Canadian midstream peer, TC Energy [TRP]( while closing in on our fair value estimate, which was $47/CAD 62 at the time. In our view, positive sentiment around the future of the Line 3 replacement project and the outlook for long-term oil sands supply growth drove the stock’s outperformance. Since the market crash, the narrative has flipped. The crash in oil prices has renewed fears about the long-term health of Enbridge’s Mainline pipeline. The Mainline holds the potential for cash flow fluctuations, which could impair dividend stability. Accordingly, Enbridge’s stock has underperformed the general market and TC Energy, shedding over 30% from its Feb. 12 high. To read more, click [here](. Sponsored Links [Buy a Link Now]( Podcast: Investing Insights From Morningstar.com Listen to a roundup of the latest videos featured on Morningstar.com [in this podcast]( available through iTunes. Free Issue | Morningstar's Stock Newsletter >> Morningstar StockInvestor is celebrating more than 10 successful years of high-quality stock investing. Its two real-money portfolios have outperformed the S&P 500 since 2001. [Get new ideas for the core of your stock portfolio](. Search Most Recent Articles [This Dividend ETF Effectively Balances Yield and Quality]( [The Fund Industry's Struggle to Provide Retirement Income]( [Market Volatility FAQ: What Our Readers Asked Us]( Latest Analyst Reports [Line]( [Asbury Automotive Group]( [McDonald's]( [Jazz Pharmaceuticals]( [Ferguson]( ABOUT OUR EMAIL TO UNSUBSCRIBE this email address to the Stock Strategist newsletter, please click "reply" and then click "send." This will unsubscribe only this email address to this specific newsletter. All subscription changes will take effect within one business day. Replies are not read by individuals, so please do not use this for queries about Morningstar.com. If you have questions about Morningstar.com or your membership, send a note to [joe@morningstar.com](mailto:%20joe@morningstar.com). ABOUT OUR PRIVACY POLICY Please [click here]( to learn about Morningstar's privacy policy. (c) Copyright 2020. Morningstar, Inc. 22 West Washington Chicago, Illinois, 60602 All rights reserved.