Wednesday, March 15, 2017

Enbridge Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Stock. On some basis this stock may look expensive, but dividend yield and P/S Ratio testing suggests that it is cheap to reasonable. High debt ratios can give it some vulnerability in bad times. See my spreadsheet on Enbridge Inc.

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.

This stock has done well for me. My total return is 15.21% with 12.05% in capital gains and 3.16% in dividends. Dividends have paid for 56% of the cost of my stock. On the share I bought in 2005, I am earning a dividend yield of 12.98% on my original purchase amount. My dividends have increased 13.1% per year. For the stock I bought in 2008, I am earning 11.55% on my original purchase amount and these dividends have increased by 14.8% per year.

The dividend yield is moderate to good. The current dividend yield is 4.29% based on a stock price of $54.38 and dividends of $2.33. This 5 year median dividend yield is 2.86%. The 10 year median dividend yield is 3.26% and the historical dividend yield is 3.49%. The dividend growth is moderate. The 5 and 10 year dividend growth is at 16.7% and 13.9% per year. They seemed to have increased their dividend every year since 1996.

Outstanding Shares have been increasing by 3.8% and 3.3% per year over the past 5 and 10 years. So when looking at growth, you should look at per share values. It can make a difference. For example, the Revenue has been growth in by 12.2% and 12.5% per year over the past 5 and 10 years. The Revenue per Share has grown over the past 5 and 10 years at 8.1% and 8.9% per year.

Their debt is quite high. The Liquidity Ratio for 2016 is 0.65. This means that current assets cannot cover current liability. If you add in cash flow after dividends and take off the current portion of the long term debt, this ratio only goes to 1.31. This is still a rather low ratio as the preferred ratio is 1.50 or higher. Covering current liabilities depends on cash flow and that the current portion of the long term debt is handled.

The Debt Ratio is also a bit low at 1.42 where the preferred ratio would be 1.50 or higher. The Leverage and Debt/Equity Ratios are rather high at 3.39 and 2.39 respectively. The Debt/Market Cap Ratio is currently at 0.68 which is not bad, but the one for 2015 was 0.99. You worry when this ratio near 1.00.

The 5 year low, median and high median Price/Earnings per share Ratios are 33.47, 38.48 and 43.82. The 10 year ratios are 19.52, 22.71 and 25.90. The historical P/E Ratios are 15.00, 16.79 and 20.37. I find only the historical ratios as being realistic for a utility stock. The current P/E Ratio is 22.95 based on a stock price of $54.38 and 2017 EPS estimate of $2.37. In consideration where this ratio has been this would seem a rather reasonable P/E Ratio, but it is rather on the high side for a Utility stock. You also got to wonder how good this test is for this stock.

I get a Graham price of $32.14. The 10 year low, median and high median Price/Graham Price Ratios are 1.51, 1.82 and 2.13. These are rather high ratios for a Utility stock. The current P/GP Ratio is 1.69. It looks relatively reasonable, but I think it is too high for a utility stock.

I get a 10 year median Price/Book Value per Share Ratio of 2.95. This is also rather high with for a utility stock. The historical median P/B Ratio is 2.56. The current P/B Ratio is 2.81. It is some 9.5% above the historical median ratio. This testing would suggest that the stock price is relatively reasonable but above the median.

Interestingly the dividend yield is higher now that it has been for quite a while. The current dividend yield is 4.29%. The historical median dividend yield low at 3.49%. The current yield is some 23% higher than the historical dividend yield. This testing suggests that the stock is relatively cheap.

The 10 year median P/S Ratio is 1.36. The current P/S Ratio is 1.17, a value some 14% lower. The current P/S Ratio is based on 2017 Revenue estimate of $43674M or $46.31 per share. This stock price testing suggests that the stock price is relatively reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price is $63.67. This implies a total return of 21.37% with 4.29% from dividends and 17.08% from capital gains based on a current price of $54.38.

Nelson Smith of Motley Fool thinks this is a good stock to grow your TFSA. Jesse Snyder on Financial Post says that the CEO of Enbridge says that pipeline companies need to get better at communicating with local communities. Stephanie Haddix on Energy Index says Enbridge's Relative Strength Index of 43.65 indicates the stock is not yet over sold or over bought. See what analysts are saying about this stock on Stock Chase. Mostly they think it is a safe investment.

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 Inc.

The last stock I wrote about was about was Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF)... learn more . The next stock I will write about will be TransAlta Corp. (TSX-TA, NSYE-TAC)... learn more on Friday, March 17, 2017 around 5 pm. Tomorrow on my other blog I will write about Million Dollar Journey... learn more on Thursday, March 16, 2017 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.


  1. I have been reading your investment talk for almost a year and have learned a great deal. I have stopped using mutual funds and have transferred my money to scotia itrade. I want to begin investing but everyone says the market is too high. I have been waiting for a pull back for 6 months but the market keeps getting higher. Should I wait for a pullback or simply purchase some blue chip canadian stocks right away. I have about 65,000. Thanks in advance for your advice! I am 23.

  2. I agree that overall the stock market is relatively high. There will be a pull back or bear market at some point. The thing is that nobody can say when this will happen. It could be soon or it be in years. Bull markets can last a lot longer than you ever thought possible.

    However, I have found that there is always some sector where you can find good companies at good price. It is important not only to buy good companies but also buy them at least at a reasonable price. That is why I do the monthly Something to Buy and for March it is here

    I also addressed in a blog entry how to use the reports I put out to see if the stock is reasonably priced on other basis and that link is here

    I have also referred new investors to the Investment Reporter which I think is the best unbiased investment letter you can get. It is expensive to subscribe to but you can often get a deal and their current deal is to buy for $5.83 a week. You can take it for a short period of time to get you started.

    I am not licensed to give out investment advice, but I also believe people should do their own research. So this email 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.