Enbridge Income Fund

I am reviewing this stock (TSX- ENF.UN) today as I have updated my spreadsheet with the December 2008 annual report and I have never blogged on this stock. It is a stock I follow, but I do not own it.

I try to get at least 11 years of data on a company. However, with this company I have only 6 years of data. This is because this income trust was only set up in June of 2003. So, for the growth figures, looking at the last 5 years, I find that most are good. The exceptions are, of course, the stock price growth. The stock price is lower than what it was 5 years ago. However, if you add in distributions from this stock, you get a return of just over 3.6% per year. At the moment, this is not a bad return.

The other growth figure that is sad is the growth in Book Value and this is not existent. A lot of income trust stocks are like this. Because they payout so much of their cash value, the Book Value does not grow. The other growth figures are good, especially the distribution growth which has average growth of just under 5% per year over the past 5 years.

When I look at liquidity, I find the ratio to be very low. It currently sits at 0.29. It was also low at the end of 2008 where it sat at 0.31. The 5 year average is low, which is 0.64, is not as bad, but it is still low. When this ratio is below 1.00, it means that the current assets can not cover the current liabilities. The Asset/Liability ratio is also low at 1.15. However, it is over 1.00. I prefer to see both these ratios at 1.50.

The Return on Equity (ROE) is also fairly low. The 5 year average at the end of 2008 was 7.2%. The ROE at the end of 2008 was a better at 8.4%. The ROE for the first half of 2009 is also low at 5.3%. The accrual ratio for both the end of 2008 and for the first half of 2009 is negative and this is good. However, this cannot make up for the low liquidity ratio.

The good think about this stock is that it has raising revenues, earnings and distributable cash. The average yield on this stock is around 8% and the current yield is just over 9.5%. The current negatives include a very low liquidity ratio and decreasing book value. Tomorrow, I will talk about what the analysts say and about the spreadsheet ratios.

The Enbridge Income Fund assets are a 50% interest in the Alliance Canada Pipeline and a 100% interest in Enbridge Pipelines (Saskatchewan) Inc. They also have Green Power assets, which include a 50% interest in NRGreen Power Limited Partnership. NRGreen operates electrical generation facilities using waste heat, and holds interest in three wind power projects in Western Canada. Just over 40% of the trust units are owned by Enbridge Inc. Its web site is www.enbridgeincomefund.com. See my spreadsheet at www.spbrunner.com/stocks/enf.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.