RE:Writing covered calls for ENBLilly:
Thanks for joining the discussion
A couple of comments:
1) While nothing is ever guaranteed in the market, ENB's stellar dividend history, including this past year, makes their dividend as close to a sure thing as any company in the market.
2) ENB has had to clear a number of hurdles in the last 5 years.
a) The first was working through the short tem costs of doubling the size of the company via the Spectra acquisition. The 18 month process was painful but the good news is that the acquisition has positioned ENB in a great position for the next 20 years or more.
b) Then ENB had to struggle through the trials and tribulations (and delays) of getting Line 3 approved and that difficult saga appears to be only 3-4 months from being in the rear view mirror.
c) The last few months have seen Michigan's Gov. Whitmer create uncertainty for ENB shareholders (not ENB itself as they have stated very clearly that they have no intention of shutting down) over her attempt to shut down Line 5. Whitmer doesn't have durisdiction over cross border or even cross state pipelines. As such, she has almost a zero chance of winning the battle (which she knows but is playing the game anyway to gain political leverage). Until the case reaches the US Supreme court which forces ENB to shut down Line 5 (which would create a massive international incident with Canada which has the 1977 treaty with the USA to stand on), Line 5 will continue to flow. Even if Line 5 did get shut down, the affect on ENB cash flow and earnings would be minimal (as in 2% to 3%).
Covered calls are a great way to enhance returns. The concern that I would have with writing covered calls on ENB at this point in time is that we are within likely within two months of ENB clearing its last significant hurdle in the form of Line 5.
Most of the large cap companies have seen their share prices return to or exceed their pre-pandemic prices. Operations at ENB are now back to the pre-panedmic conditions and the new cash flow bonanza from Line 3 is almost upon us.
It would be a shame to see you lose your ENB share position if there is an announcement of a resolution to Line 5, which could happen at any time. The moment that the Line 5 issue is resolved, the price of ENB shares should gravitate back to or perhaps exceed pre-pandemic prices.
If you are still want to write covered calls with the intention of retaining your ENB shares, I would suggest that you choose an expiry date before the May 12th deadline date for Line 5.