Tuesday, March 18, 2014

Enbridge Inc. 2

I own this stock of Enbridge Inc. (TSX-ENB, NYSE-ENB). I first bought this stock in 2005 and then bought more in 2008 and 2009. This stock was on the Dividend Achievers, the Dividend Aristocrats list and also on Mike Higgs' list of Canadian Dividend Growth stocks. Enbridge is considered to be a low risk stock.

Over the past year in insider trading there was some $45M of insider selling. There was no insider buying. Insiders have lots and lots of priced options. They also have option like vehicles called Performance Units. The CEO has shares worth around $7M, the CFO has shares worth around $14M and the Chairmen of the Board has shares worth around $1.5M.

In 2013 outstanding shares were increased by 5M shares with a book value of $69M. At the end of 2013, 5M shares would have a value of $232M. The year 2012 was not much different when outstanding shares were increased by 6M shares with a book value of $78M. At the end of 2012, 6M shares would have been worth $258M. I am just trying to get a handle on how the company is affected by options.

The 5 year low, median and high median Price/Earnings Ratios are 20.98, 25.14 and 29.30. These are rather high and higher than the 10 year values of 17.93, 20.36 and 22.77. The current P/E Ratio is 25.94 based on a stock price of $49.03 and 2014 earnings of $1.89. If you compare this P/E Ratio to the 5 year median ratio, it is around the median price, but compared to the 10 year P/E Ratios, the P/E Ratio is high.

I get a Graham Price of $21.94. The 10 year low, median and high median Price/Graham Price Ratios are 1.40, 1.59 and 1.77. The current P/GP Ratio is 2.23. This stock test says that the stock price is rather high.

I get a 10 year Price/Book Value Ratio of 2.79 and a current P/B Ratio of 4.33. The current P/B Ratio is some 55% higher than the 10 year P/B Ratio. The current P/B Ratio is based on a BVPS price of $11.32 and a current stock price of $49.03. This stock price test says that the stock price is rather high.

I get a 5 year median dividend yield of 3% and a current dividend yield of 2.86% based on a dividend of $1.40 and a stock price $49.03. Ideally, you want the current dividend yield to be higher than the 5 year median dividend yield. However, the current yield is only 4.8% lower than the 5 year median dividend yield and this suggests that the current stock price is reasonable.

I have historical dividend yields going back to 1994. However you calculate the historical median or average dividend yield it is higher than the current yield by 7% to 28%. It is only in the last 2 years that the median dividend yield went below 3%. By the historical dividend yield testing the current stock price is somewhat high to quite high.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. However, the vast majority of the recommendations are a Buy and the consensus recommendation would be a Buy. The 12 month consensus price target price is $53.10. This target price suggests a total return of 11.16% with 2.86% from dividends and 8.30% from capital gains.

The latest news for Enbridge is the replace of 46 year old pipeline running from Edmonton to Superior, Wisconsin. The Motley Fool comments on the fact that this company had a quarterly loss in the fourth quarter of 2013. They called it a quarterly hiccup.

I think that his stock is still priced rather high. See my spreadsheet at enb.htm.

This is the second of two parts. The first part was posted on Thursday, March 13, 2014 and is available here. The first part talks about the stock and the second part talks about the stock price.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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1 comment:

  1. Stock price includes future earnings potential trial from 30 billion in new projects $50+ stock price is conservative