I own this stock of Enbridge Inc. (TSX-ENB, NYSE-ENB). I had followed this stock for some time before I bought it in 2005. I also bought some more in 2008 and 2009. I have made a total return on this stock of 21.04% per year with 3.23% per year from dividends and 17.81% from capital gains.
This is a stock with a reasonable dividend yield and good dividend increases. The 5 year median dividend yield is 3.26% and the 5 and 10 year dividend increases are at 12.9% and 11.5% per year. On my stock purchased in 2005, I started with a dividend yield of 2.78% and on that money I am now making a yield of 7.02%.
The dividend payout Ratios are fine for this company, with the 5 year median DPR for earnings at 66% and for Cash Flow at 32%. (See my site for information on Dividend Payout Ratios).
Over the past 5 and 10 years the outstanding shares have increased by 1.8% and 2.1% per year. The shares have been increased because of stock options and DRIP and share issues. There has been very nice growth in Revenue per Share at 14% and 16% per year over the past 5 and 10 years. Also adjusted EPS has grown nicely at13% and 9% per year over the past 5 and 10 years.
The Book Value has not grown much over the last 5 and 10 years with growth at just 3.8% and 5.7% per year. However this is because of change in accounting rules from CDN GAAP to US GAAP. If 2011 account was in US GAAP, then the Book Value would have grown between 2011 and 2012 instead of dropping.
The Return on Equity is good at 13.9% and with a 5 year median at also 13.9%. The ROE on comprehensive income is fine at 9%, but this makes it quite a bit lower than the ROE on net income. This is true of the difference between ROE on comprehensive income and net income generally. It can imply that the earnings are not of a good quality.
The thing I do not like about this stock is the high debt level. The current Liquidity Ratio is 0.93 and this is pretty typical of this stock. This means that the current assets do not cover the current liabilities. However, if you add in cash flow after dividends you get a better Liquidity Ratio of 1.21. This is low, but adequate. (Unfortunately, utility companies rely on cash flow to increase their Liquidity Ratios. This is not unusual.)
The Debt Ratio is also a bit low with a current ratio of 1.46. This is also typical of this stock. I prefer a Debt Ratio of at least 1.50. However, this is a utility stock and many utility stocks have rather high debt loads. The Leverage and Debt/Equity Ratios are also not what I like to see with these ratios at 6.94 and 4.77. These are higher than the 5 year medians of these ratios at 4.00 and 2.87 and a bit higher than most utility companies.
This is a core utility holding for me. It has a good history of paying and increasing its dividends. Although like a lot of utility companies, it does have a high debt load. However, investors have been well paid for the risk they take with this stock. See my spreadsheet at enb.htm.
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 here Enbridge.
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 for stocks followed and investment notes. Follow me on Twitter or StockTwits.
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