Tuesday, March 23, 2010

Enbridge Inc 2

I am reviewing this stock (TSX-ENB) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought shares in this company in for the first time July 2005 and I purchases more stock in November 2008 and January 2009. To date I have made a return of 11.3% per year. I am making a current yield of 4.4% on my investment.

When I look at Insider Buying and Insider Selling, I see that there is some $25M of insider selling. However, the executives of this company have more stock options than actual shares. What they are selling are their stock options. This is not great, but it really does not tell you much. What the company thinks of their shares is more clearly stated in the recent increase in dividends. The recent dividend increase says the company thinks it will be doing well over the next little while.

The next thing to look at is the P/E ratio. Since all the estimates I can find are based on adjusted earnings, I will look at the associated P/E with adjusted EPS. Ratios are often relative. The 5 year low P/E is 18 and the current P/E is 18.9. The 5 year average high is 23.3. All these P/Es are on the high side for P/E ratios. However, on a relative basis, the P/E on this stock is on the low side. Then again, if you look at the P/E based on the real earnings, the P/E is just 11.6 and this is on the low side.

I get a Graham Price for 2009 of $42.86. The current stock price is $48.66. The current stock price is 15% above the Graham Price. For this stock, the stock price has been consistently above the Graham Price. Even the low stock price for a year has been mostly been 30% above the Graham Price. I get a 5 year average of the Stock Price being above the Graham Price by some 7%, but this is because we have been in a recession and the stock price has been quite low.

For the dividend yield, the current yield of 3.4% is slightly above the 5 year average of 3.2%. The last thing to look at is the Price/Book Value ratio. The currently Price/Book Value of 2.57 is just above the 10 year average of 2.49. Looking at all these things, it would seem that the stock price is probably a fair one.

So what do the analysts say? Their recommendations go from Strong Buy to Buy to Hold. I cannot find any other ratings. The ones giving Hold recommendations do not see the price of this stock appreciating much more in the next 12 months. The ones with the Strong Buy or Buy recommendations mention the recent increase in dividends. (See my site for information on analyst ratings.) The consensus recommendation is probably a Buy. I should point out that there are lots of analysts following this stock and a lot of them do have a Hold recommendation. All the analysts seem to think that this is a safe stock to have.

I am pleased with my investment in this company and I plan to continue to hold what shares I have.

Enbridge is focused on three core businesses of crude oil and liquids pipelines, natural gas pipelines, and natural gas distribution. They operate in Canada and US. Its web site is www.enbridge.com/. See my spreadsheet at www.spbrunner.com/stocks/enb.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 and my investing notes at www.spbrunner.com/investing.html. Follow me on twitter.

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