Friday, March 16, 2018

Enbridge Inc.

Sound bite for Twitter and StockTwits is: Dividend growth utility. Not surprising that most testing shows the stock price as cheap. This is not surprise and stock price has been declining recently. A recent purchase has stressed the balance sheet. This is core stock hold for me. I will not be buying more because I own enough. I also will not be selling. 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.

The outstanding shares of this company were increased by 79% in 2017. This was mainly due to the merger with Spectra Energy Corp. The company's outstanding shares have increased by 16.06% and 9.08% per year over the past 5 and 10 years. When the outstanding shares are increasing you need to look at per share values to know what the real growth in the company is.

Dividends were usually in the moderate range (2 to 3%), but lately they have been in the good range (over 4%). The current dividend is 6.52%. The 5, 10 and historical dividend yields are 3.48%, 3.27% and 3.49% respectively. Price has been going down lately. Price and yield move in the opposite directions.

I have dividend information go back 27 years. The dividend growth over the past 5, 10, 15, 20, 25 and 27 years are 16.38%, 14.65%, 13.11%, 11.68%, 9.49% and 8.76%. The last dividend increase was in 2018 and it was for 10%. Dividends increase in 2017 by 13.82% and so far in 2018 by 11.23%.

However, they cannot afford their current dividends. The Dividend Payout Ratio is 146% with 5 year coverage of 165%. Analysts do not expect the dividends to be covered by EPS until around 2020. This can cause the company problems in the short term. The DPR ratio for CFPS is high for 2017 at 59%. The 5 year coverage is good at 36%. (For CFPS the preferred DPR ratio is 40% and lower.)

The Total Return for the periods of 5, 10, 15, 20, 25 and 27 are 6.62%, 13.49%, 14.89%, 13.17%, 17.52% and 11.38%. The portion of this Total Return attributed to capital gain is 2.70%, 9.41%, 10.72%, 9.49%, 12.02% and 8.10%. The portion of this Total Return attributed to dividend is 3.92%, 4.08%, 4.17%, 3.68%, 5.50% and 3.28%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 26.67, 30.94 and 35.21. The 10 year corresponding ratios are 21.17, 25.57 and 29.96. The historical ratios are 17.73, 18.07 and 20.78. I find these quite high for a utility stock, especially the most recent ones. The current P/E Ratio is 17.38 based on a stock price of $41.18 and 2018 EPS estimate of $2.37. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $41.39. The 10 year low, median and high median Price/Graham Price Ratios are 1.51, 1.82 and 2.13. The current P/GP Ratio is 0.99 based on a stock price of $41.18. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Book Value per Share Ratio is 2.95. The current P/B Ratio is 1.28 based on Book Value of $54,455M, Book Value per Share of $32.13 and a stock price of $41.18. The current P/B Ratio is some 56% below the 10 year median. This stock price testing suggests that the stock price is relatively cheap.

The historical median dividend yield is 3.49%. The current dividend yield is 6.52% based on dividends of $2.68 and a stock price of $41.18. The current yield is some 87% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.

I get a Price/Sales (Revenue) Ratio of 1.40. The current P/S Ratio is 1.48 based on 2018 Revenue of $47,300M, Revenue per Share of $27.91 and a stock price of $41.18. The current ratio is some 5% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations I find Strong Buy (1), Buy (9) and Hold (6). The consensus would be a Buy. The 12 month stock price is $56.47. This implies a total return of 37.98% with 31.72% from capital gains and 6.26% from dividends based on a stock price of $42.87.

Jason Phillips of Motley Fool thinks now is the time to buy this stock. Daniel Acker of Bloomberg in the Globe and Mail talks about sell off and recovery due to after the U.S. eliminated a tax break for owners of certain interstate pipelines. Enbridge says it does not expect any material change to its financial guidance because of this. Sam Bishop on Simply Wall Street says analysts sees the company doing well over the next 3 years. See what analysts are saying about this stock on Stock Chase. They mostly like this stock.

Enbridge Inc. serves the oil & gas industry. Its key activity involves gathering and transportation of crude oil and natural gas. 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 Monday, March 19, 2018 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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