Can Equitable Group Inc. and Enbridge Inc. Rebound This Year?

Equitable Group Inc. (TSX:EQB) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are experiencing volatility as their respective industries have entered a period of turmoil in Canada.

| More on:

The January contraction of GDP in Canada was not a welcome sight for investors in what has been an extremely choppy beginning for the S&P/TSX Index. Lower output of non-conventional oil extraction and a slumping real estate industry contributed the most to the decline. Is this the beginning of a troubling trend for these industries and the economy at large?

Equitable Group Inc. (TSX:EQB) stock has dropped over 20% in 2018 thus far. The output of real estate and broker offices fell 12.8% in the month of January, representing the largest monthly decline since November 2008. This drop is more than likely to continue in light of recently released data.

The month of March saw detached homes in and around Toronto decrease 46% from the same period in the prior year. The average price dropped 17% to $1.01 million, according to the Toronto Real Estate Board (TREB). This resulted in the average selling price for all homes to fall 14% to $784,558 – the largest decline since 1991. New OSFI mortgage rules, which include a stress test for uninsured borrowers and an interest rate hike in January have apparently put increased strain on real estate.

TREB director of market analysis Jason Mercer said that price growth is likely to improve throughout the year in comparison to a rough first quarter. A key interest rate decision is also on the slate for the Bank of Canada later this month, but it will be data dependent, as usual. The Ontario election also has the potential to impact the housing market. Doug Ford, the leader of the Ontario Progressive Conservatives, has hinted that he will seek to scrap the foreign buyer tax if he’s elected in June. The PCs have sustained a sizable lead in the polls since the beginning of 2018.

Enbridge Inc. (TSX:ENB)(NYSE:ENB), the largest energy infrastructure company in North America, has also seen its stock suffer at the start of 2018. Shares are down over 15% this year, and Enbridge reportedly plans to sell off more assets than originally planned – up to $8 billion, which was double the original projection. Oil and gas extraction plunged 3.6% in January, which represented the largest decline since May 2016. Statistics Canada pointed to unscheduled maintenance shutdowns, resulting in a 7.1% reduction in oil sands production.

The federal government reportedly plans to spend $280,000 for a new study to explore Canada’s competitiveness in the oil and gas industry. The United States has outshone Canada as an energy investment destination in recent years. Key contributors have been the “energy friendly” Republican administration combined with tax reform that slashed the corporate tax from 35% to 21%. According to the consulting firm Wood Mackenzie, investment in the Canadian oil and gas industry declined over 50% between 2014 and 2016.

Enbridge remains an enticing pick due to its dividend yield, which is now over 6%. The company still faces uncertainty with its Line 3 pipeline, but investors should get closure on the project by mid-2018. Most recently, Enbridge has announced its intention to sell $2 billion in Western Canadian gas assets and a partial stake in its German offshore wind project.

It’s certainly worth monitoring this dividend star in 2018, but its steep slide dating back to last year makes it a tough buy even for income investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Energy Stocks

Pumpjack in Alberta Canada
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Imperial Oil stock is in a precarious position, so what should investors consider as we head nearer to 2025?

Read more »

construction workers talk on the job site
Energy Stocks

Is Suncor Stock a Buy, Sell, or Hold for 2025?

Suncor Energy stock is trading at its decade-high on uncertainty in the oil market. Should you buy, sell, or hold…

Read more »

four people hold happy emoji masks
Energy Stocks

If You Like Exxon Mobil, Then You’ll Love These High-Yield Oil Stocks 

Here are three high-yield oil stocks with the potential to outperform over the medium to long-term.

Read more »

bulb idea thinking
Energy Stocks

2 No-Brainer Utility Stocks to Buy Now for Under $1,000

Canadian Utilities (TSX:CU) is a utility stock that may be worth a look in late 2024.

Read more »

dividend growth for passive income
Energy Stocks

Enbridge Stock: Buy, Sell, or Hold?

With a dividend yield of 6.4% and strong long-term growth profile, let's take a look at the investment case for…

Read more »

construction workers talk on the job site
Energy Stocks

Mattr Stock: Why Now Is the Time to Buy This Undervalued Gem

A top but undervalued growth stock is a buying opportunity today.

Read more »

sources of renewable energy
Dividend Stocks

Want Passive Income? This 5.4% Dividend Stock Pays Cash Every Month

This dividend stock doesn't just have a strong monthly dividend -- it also has an excellent future outlook.

Read more »

oil pump jack under night sky
Energy Stocks

Is Baytex Energy Stock a Good Buy?

Baytex Energy is a beaten-down TSX Energy stock that trades at a reasonable valuation in October 2024.

Read more »