Post by
Obscure1 on Jan 04, 2022 7:35pm
Where the heck does one invest cash?
That is always my conundrum.
In times of inflation, which we are surely in, holding cash is a mug's game.
As peope get older and begin to rely upon investment income, the investing objectives change.
But where do you find investments that offer:
* as close to a guaranteed investment as possible as in immune to economic fluctuations
* a high yield of 5% or more
* growth opportunities above and beyond paying simply paying out a big dividend
* a strong balance sheet
* strong management that communicates their business objectives clearly
Suncor checks off the yield box for sure and the balance sheet is rapidly improving.
At the moment, the status growth opportunity and good management are up in the air as far as I'm concerned. I think the BoD has Little pointed in the right direction. Growth opportunities will be available due to Suncor's enormous cash generating capabilities, but as Experienced has pointed out repeatedly, until Suncor tells the street what opportunities the company is targeting, the subject remains as an unknown. The street doesn't like unknowns.
Interestingly enough, and probably contrary to the thinking of most pundits, I believe that the ESG "plague" that has haunted SU and the entire industry for the last couple of years will actually work out to the benefit of SU. I have posted my reasons why in the past (large reservers, low cost, strong balance sheet). The oil industry and SU in particular will always be subjected to the whims of oil prices which leaves the company vulnerable. Eventually, the demands of ESG investors and politicians may terminate the use of hydrocarbons, but it is not going to happen in my lifetime and I'm not that old.
What is a better investment imo? Enbridge
ENB ticks off all of the boxes for older investors imo.
ENB yields about 7% and it is reasonable and conservative to assume that a buy and hold stategy will yield over 10% per year due to ENB's "inline" (ie much lower risk) opportunities, regardless of the price of oil.
I spent the last couple of weeks grinding through the implications of every possible detail of the ENS split because I wanted to find out if ENS was a good/bad/indifferent alternative to ENB.
My DD included detailing the annual rate of deterioration of the NAV due to the fact that the Common A shares of the split pay out more in dividends than the income provided to ENS by their ownership in ENB shares. The deterioration of the NAV is the factor that destroys so many Split offerings.
Without boring you with details, which might possibly make this the longest SH post in history, I can say with absolute confidence that if one believes that ENB will indeed grow its DCF by 5% to 7% going forward, ENS is a better investment.
If investors in ENS track the NAV (which the company posts daily as their only investment is in ENB), and the premium of the share price to its NAV, and trade out and them back in a couple of times per year when the premium gets out of whack, it is simple to earn a 20% annual return on one of the most conservative investments in the market.
IMO, ENB is the best security to own in Canada. Losing a Canadian bank would be a much less catastrophic event for Canadians than losing ENB.
IMO, as long as ENB is in growth mode, ENS is a better way to play ENB, even if you want to buy it and forget it.
Comment by
jx7000 on Jan 05, 2022 6:44pm
My other holdings are in the banks. ZWB etf is a good one; it pays a little less than 5.5% right now, although I bought at a lower price and am happy.