Does fixed debt equal fixed income?So it looks like ENB has made a move to solidify its floating debt into fixed debt.
Debt and whether ENB can pay its debt, is a factor that has plagued the stock since before I became invested in it.
Why do they do this instead of paying down debt like a lot of other companies within the O&G sector?
Guaranteed revenue streams. Are they guaranteed? Probably. If you believe in growing demand.
There are a few O&G players in the sector that are attempting to run debt free.
Are their stocks share price wildly overvalued and trading at high multiples? Nope. Why not?
Because as on poster on another board aptly put it you can run in barefeet and you can run in expensive running shoes. Running in running shoes is probably more beneficial to your performance and your feet. Are the more expensive shoes worth the extra debt? That is the question.
A lot of us choose to run debt free in our personal finances. Are we safe? Yes.
Are we leveraging our debt to the best of our ability in order to monetize it? Nope.
After all if you can borrow money at 4% and you can earn 10% it seems like an easy 6% right?
Nope. Everyone here knows that earning that 10% is a job and depending on your love of investing it can be time consuming, risky and stressfull. For those of you depending on the income generated by your investments it can be as stressfull as a mortgage for a new homeowner wading into the housing market for the vary first time and having to borrow the money to achieve their home ownership dream.
Any of us that have gone through this process and come out the other side with a fully owned home know that the debt was totally worth the risk and the reward.
But then a lot of us stay debt free and do not use the increased leverage that home ownership and the increased allowed debt can gain us invested. Why? Safety, security and peace of mind.
Now within the industry (any publically traded industry) not leveraging or monetizing your debt can be seen as a detriment to those investors that know that debt can earn more money than it costs.
Why don't they see it as a risk or a job?
They do!
But it is the company's risk and IT IS THEIR JOB!
ENB probably leverages their debt to the absolute maximum that risk versus reward allows.
They have just made moves to lock in their interest rates (like a fixed mortgage).
The simple math is they are borrowing at 4% to earn 10% and pay us 6.5%.
I will be honest. If I was really smart, I would borrow to buy more of ENB.
I never said I was really smart, but I am smart enough to hold a lot of ENB.
Go Enbridge! ;-)