Thursday, September 25, 2014

Enbridge Income Fund Holdings Inc.

I do not own this stock of Enbridge Income Fund Holdings Inc. (TSX-ENF, OTC-EBGUF). I have followed this stock for some time but I have not owned it. I do own Enbridge Inc. (TSX-ENB, NYSE-ENB). Enbridge Inc. has investments in this company and Enbridge Income Fund

What I hate about reviewing this stock is that it is complicated. The problem with complexity is that it is easy to miss something important. Just looking at the stock's financial statements does not give you the whole picture. You have to also review the financials for Enbridge Income Fund in which this fund is invested.

If you look at the total return for shareholders they have done well. Over the 5 and 10 years the total return on this fund is 24.94% and 13.82% per year with 18.02% and 8.13% from capital gains and 5.70% and 6.92/% from dividends.

Dividends are good and the growth in dividends is moderate. The 5 year median dividend yield 6.39%, but the current one is much lower at 4.52%. The current dividend yield is also lower than the historical (or 10 year low) of 5.28%. This fund has just been on the TSX since 2003. Dividends have grown at 5.8% and 5% per year over the past 5 and 10 years.

The Dividend Payout Ratios are fine as they can payout most of what they received from the Enbridge Income Fund. The 5 year median DPR for EPS is at 87% and the 5 year median DPR for CFPS is 82%.

The Enbridge Income Fund in which this stock is invested seems to be paying out to its shareholders much more than they are earning. This feeds into the fact that there is a negative book value and I do not like negative book values on a stock. However, they are not paying out more than their cash flow and it is an income fund.

The 5 year median Price/Earnings per Share Ratios are 14.52, 15.81 and 17.10. The current P/E Ratios is 21.29 based on a stock price of $30.45 and 2014 EPS estimate of $1.43. This stock price test suggests that this stock is relatively expensive.

I get a Graham Price of $29.44. The 10 year Price/Graham Price Ratios are 0.84, 1.02 and 1.20. The current P/GP Ratio is 1.03. This stock price test suggests that this stock is relatively reasonable.

I get a 10 year median Price/Book Value per Share Ratio of 1.36 and the current P/B Ratio at 1.13 is some 17% lower. The current P/B Ratio is based on a stock price of $30.45 and a BVPS of $26.94. This stock price test suggests that this stock is relatively reasonable.

However, when you look at dividend yield, the current dividend yield at 4.52% is 30% lower than the 5 year median dividend yield of 6.39% and 45% lower than the historical average dividend yield of 8.32% and 35% lower than the historical median dividend yield of 7%.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendation is a Hold. The majority of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month stock price is $28.30. This is some 7% before the current stock price. The total return would be a negative 2.54% with dividend of 4.52% and a capital loss of 7.06%.

There is an interest press release on Market Wire about Enbridge Income Fund entering into a $1.76 Billion transaction With Enbridge Inc. for natural gas and diluent pipeline interests. The site Energy Global also talks about Enbridge Inc. transfer of a package of natural gas and diluent pipeline interests to ENF.

Sound bit for Twitter and StockTwits is: Complex and expensive. It is complex enough to evaluate the financial statement of a stock. Here you have to evaluate two stocks and also the inter-reaction of these two stocks or funds. I am always worried that I have missed something important when a stock is complex to evaluate. (I also worry a bit about this in connection with my investment in Enbridge Inc. also.)

In any event, I have enough invested in Enbridge Inc. without putting money into this stock also. Enbridge Inc. holds interests in both Enbridge Income Fund Holdings Inc. and Enbridge Income Fund. Talk about being complex. However, my investment in Enbridge Inc. is also the main reason I follow both Enbridge Income Fund Holdings Inc. and Enbridge Income Fund. See my spreadsheet at enf.htm and my spreadsheet on Enbridge Income Fund at enbif.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow. I am still trying to catch up to where I should be in reviewing my list of stocks.

Enbridge Income Fund Holdings Inc. is a publicly traded corporation. The Company, through its investment in Enbridge Income Fund, holds high quality, low risk energy infrastructure assets. The Fund's assets include a 50% interest in the Canadian segment of the Alliance Pipeline, a 100% interest in the various pipelines comprising the Saskatchewan System, and interests in more than 400 megawatts of renewable and alternative power generation capacity. Its web site is here Enbridge Income Fund Holdings.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.


  1. Good review, good to know ENF is complex, I feel less ashamed now for not understanding what ENF is really bout lol...

    I hold both Enbridge (ENB) and Enbridge (ENF). If I remember currently, ENF used to be a Derek Foster - who's going to be at your Money Show in Toronto soon, lucky you!

    The only reason I bought ENF its because of its dividend yield being higher than ENB.

  2. I do not generally buy companies that are closely related because it makes it simpler to keep track of the relative amount I have invested in a company. However, there is nothing wrong with investing in closely related companies; you just have to keep the relationship in mind when deciding what your limit is for investment for any one company.