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.
When I was updating my spreadsheet, I noticed that I have done well on this stock also. I bought shares in 2005 and although it is worth less than at this time last year, but total return if 11.69% per year with 6.73% from capital gains and 4.96% from dividends.
Another thing to note is this company has a high debt level. Most of the debt ratios are fine, except for the Liquidity Ratio. For 2020 it is still under 1.00 at 0.96 even with cash flow after dividends and current long term debt added back. Current, in this calculation, the same way with cash flow after dividends and current long term debt added back, it is 1.03. When this ratio is under 1.00, it means that current assets cannot cover current debt.
The dividend yields are currently high with dividend growth currently going low. The current dividend yield is high (7% and higher) at 7.53%. The 5 year median dividend yield is good (5% and 6% ranges) at 5.61%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 3.85% and 3.50%. The dividend growth used to be moderate (8% to 14% ranges) with the 5 year dividend growth at 11.7% per year. However, the latest dividend increase was low at 3.09%. There are C19 concerns.
The Dividend Payout Ratios (DPR) needs improving. The DPR for EPS for 2020 was 219% with 5 year coverage at 147%. It has been higher than 100% since 2012. Analysts see this number improving over the short term but not below 100%. The DPR for CFPS for 2020 is 79% with 5 year coverage at 63%. It has been higher than 40% since 2017. A good ratio is 40% or less for CFPS. I have an Adjusted EPS and the DPR for Adjusted EPS for 2020 is 134% with 5 year coverage at 112%. I also have the DPR for Adjusted Funds from Operations (AFFO) and the DPR for AFFO for 2020 is 69% with 5 year coverage at 63%. The DPR for Free Cash Flow for 2020 is 158% with 5 year coverage at 236%.
Debt Ratios are fine, but the Liquidity Ratio should be improved. The Long Term Debt/Market Cap Ratio for 2020 is 0.76, decreasing to 0.68 currently. The Debt Ratio is fine at 1.67 as I like this ratio to be 1.50 or better. The Leverage and Debt/Equity Ratios are fine at 2.49 and 1.49, respectively.
The Liquidity Ratio is low, but it has always been low. For 2020 it is 0.53. Generally, to get to a value over 1.00, you would have to include cash flow after dividends and add back in the current portion of the long term debt. However, for 2020 I get a value of just 0.96. The current value is 1.03 and just cover 1.00. The problem is when the Liquidity Ratio is below 1.00, current assets cannot cover current liabilities. If you look at the Assets/Current Liability Ratio, it is 11.47. This is a high value and means that current liabilities are only a small part of the company’s assets.
The Total Return per year is shown below for years of 5 to 30 to the end of 2020. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 11.74% | 3.65% | -2.41% | 6.06% |
| 2010 | 10 | 14.32% | 9.34% | 3.76% | 5.58% |
| 2005 | 15 | 12.99% | 10.50% | 5.53% | 4.98% |
| 2000 | 20 | 12.32% | 11.55% | 6.80% | 4.76% |
| 1995 | 25 | 10.79% | 15.89% | 9.74% | 6.15% |
| 1990 | 30 | 8.91% | 10.69% | 6.59% | 4.10% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.03, 30.82 and 35.21. The corresponding 10 year ratios are 24.39, 30.88 and 36.90. The corresponding historical ratios are 17.85, 19.35 and 22.50. The current P/E Ratio is 17.21 based a stock price of $45.43 and EPS estimate for 2021 of $2.64. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $39.65. 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 1.15 based on a stock price of $45.43. This ratio is below the low median 10 year ratio of 1.51. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.89. The current P/B Ratio is 1.72 based on a stock price of $45.43, Book Value of $53,620M and a Book Value per Share of $26.47. The current ratio is 41% below the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.18. The current P/CF Ratio is 8.54 based on a stock price of $45.43, Cash Flow per Share estimate for 2021 of $5.32 and Cash Flow of $10,788M. The current ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 3.50%. The current dividend yield is 7.35% based on dividends of $3.34 and a stock price of $45.43. The current dividend yield is 110% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.85%. The current dividend yield is 7.35% based on dividends of $3.34 and a stock price of $45.43. The current dividend yield is 91% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.54. The current P/S Ratio is 2.08 based on a stock price of $45.43, Revenue estimate for 2021 of $44,311M and Revenue per Share of $23.00. The current ratio is 35% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests say the stock price is cheap, but the P/S Ratio tests says it is expensive. The Dividend Payout Ratios for EPS are too high suggesting the dividend is too high. The P/S Ratios is not passed because Revenue is not expected to recover for a couple of years. The P/S Ratio for 2023 is 1.57 which is very close the current one of 1.54. I also like the P/B Ratio test and this says the stock price is cheap as do all the other tests.
Is it a good company at a reasonable price? I own stock in this company and I intend to keep it. I feel that this is a good long term investment in a dividend growth stock. The stock price current is probably reasonable. I think the problem is that although the company will recover from the recent problems, it may take a while. I do have patience for long term investments.
When I look at analysts’ recommendations, I find Strong Buy (9), Buy (12), Hold (3) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $51.46. This implies a total return of 20.675 with 13.32% from capital gains and 7.35% from dividends.
Analysts give this stock on Stock Chase mostly a Buy recommendation. Ambrose O'Callaghan on Motley Fool says this company is a buy for the long term. The executive summary on Simply Wall Street gives this company 3 stars out of 5 and lists 3 risks. A writer on Simply Wall Street does not like the fact that dividends are growing with DPRs high and declining earnings. Dividend Guy on YouTube talks about whether the dividend is sustainable. Its complex, but the dividend should be fine and they should be able to increase them.
Enbridge Inc is an energy generation, distribution, and transportation company in the U.S. and Canada. Its web site is here Enbridge Inc.
The last stock I wrote about was about was Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF) ... learn more. The next stock I will write about will be TransAlta Corp (TSX-TA, NSYE-TAC) ... learn more on Wednesday, March 24, 2021 around 5 pm. Tomorrow on my other blog I will write about Canadian Dividend Stocks.... learn more on Tuesday, March 23, 2021 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.
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