Is it a good company at a reasonable price? I do not think that this stock will do as well in the future, certainly the near future, as it has done in the past. Dividend increases has slowed and will be slow until DPRs are better. It is a utility stock and utility stocks tend to have lots of debt and so will not do well in a raising interest rate environment. However, I believe it is a solid stock for my portfolio, so I will continue to hold this stock.
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 I have done well with this stock. I have it for over 18 years and have made a total return of 11.62% per year with 5.57% from capital gains and 6.05% from dividends. This is basically what you expect from a utility stock, with capital gains and dividends fairly even for a total return.
I noticed that the Liquidity Ratio is better in 2023 than it has been for years. It has been under 1.00 where ideally it should be 1.50 or better. For 2023 it is 1.21. Utilities have a lot of debt. Generally, I look at the current portion of the debt and make sure it is being rolled over, and if so, add back the current portion of the debt to get a reasonable Liquidity Ratio.
If you had invested in this company in December 2013, for $1,021.02 you would have bought 22 shares at $46.41 per share. In December 2023, after 10 years you would have received $593.98 in dividends. The stock would be worth $1,049.40. Your total return would have been $1,643.38. This would be a total return of 5.79% per year with 0.27% from capital gain and 5.52% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $46.41 | $1,021.02 | 22 | 10 | $593.98 | $1,049.40 | $1,643.38 |
The current dividend yield is high with dividend growth low. The current dividend yield is high (7% or over) at 7.54%. The 5 and 10 year median dividend yield is good (5% to 6% ranges) at 6.98%, and 5.93%. The historical median dividend yield is moderate (2% to 4% ranges) at 3.67%. The dividend increases are currently low with dividend increases at 5.6% per year over the past 5 years. The last dividend increase was in 2024 and it was for 3.1%.
The Dividend Payout Ratios (DPR) are too high. The DPR for 2023 for Earnings per Share (EPS) is too high at 125% with 5 year coverage at 149%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is too high at 127% with 5 year coverage at 123%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 76% with 5 year coverage at 76%. The DPR for 2023 for Free Cash Flow 1 (FCF) is fine at 78% with 5 year coverage too high at 135%. The DPR for 2023 for Free Cash Flow 2 (FCF) is fine at 78% with 5 year coverage too high at 124%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 125.00% | 148.85% |
| AEPS | 127.24% | 123.21% |
| CFPS | 76.26% | 75.71% |
| FCF 1 | 78.03% | 135.45% |
| FCF 2 | 78.03% | 124.58% |
Debt Ratios should be fine, but Liquidity Ratio is low. The Long Term Debt/Market Cap Ratio for 2023 is fine at 0.74 and currently at 0.72. The Liquidity Ratio for 2023 is too low at 1.0.83. If you added in Cash Flow after dividends, the ratios are still too low at 1.21 and currently at 1.07. I prefer these to be at 1.50 or higher. The Debt Ratio for 2023 is fine at 1.56. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.80 and 1.80.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.74 | 0.72 |
| Intang/GW | 0.04 | 0.03 |
| Liquidity | 0.83 | 0.83 |
| Liq. + CF | 1.21 | 1.07 |
| Debt Ratio | 1.56 | 1.56 |
| Leverage | 2.80 | 2.80 |
| D/E Ratio | 1.80 | 1.80 |
The Total Return per year is shown below for years of 5 to 33 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 5.75% | 9.78% | 2.38% | 7.40% |
| 2013 | 10 | 10.91% | 5.79% | 0.27% | 5.52% |
| 2008 | 15 | 11.87% | 12.17% | 6.04% | 6.13% |
| 2003 | 20 | 11.33% | 11.98% | 6.54% | 5.45% |
| 1998 | 25 | 10.69% | 12.18% | 7.08% | 5.10% |
| 1993 | 30 | 9.25% | 14.45% | 8.56% | 5.89% |
| 1990 | 33 | 8.37% | 10.81% | 6.48% | 4.33% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.13, 17.96 and 19.80. The corresponding 10 year ratios are 22.20, 28.40 and 32.91. The corresponding historical ratios are 18.01, 18.66 and 23.04. The current P/E Ratio is 17.11 based on a stock price of $48.55 and EPS estimate for 2024 of $2.84. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 15.46m 17.83 and 20.09. The corresponding 10 year ratios are 16.77, 19.10 and 22.76. The current P/AEPS Ratio is 17.34 based on a stock price of $48.55 and AEPS estimate for 2024 of $2.80. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $39.90. The 10-year low, median, and high median Price/Graham Price Ratios are 1.12, 1.29 and 1.49. The current ratio is 1.22 based on a stock price of $48.55. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Book Value per Share Ratio of 1.88. The current P/B Ratio is 1.92 based on a Book Value of $53,707M, Book Value per Share of $25.27 and a stock price of $48.55. The current ratio is 2% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2024 of $26.30 but the analyst calculates the Book Value differently than I do and their 10 year median ratio is 1.65. The Book Value per Share estimate of $26.30 implies a P/B of 1.85 with a stock price of $48.55 and Book Value of $55,888M. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 9.98. The current P/CF Ratio is 8.56 based on a Cash Flow per Share estimate for 2024 of $5.67, Cash Flow of $12,049M and a stock price of $48.55. The current ratio is 14% 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 3.67%. The current dividend yield is 7.54% based on a stock price of $48.55 and dividend of $3.66. The current dividend yield is 105% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.93%. The current dividend yield is 7.54% based on a stock price of $48.55 and dividend of $3.66. The current dividend yield is 27% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 1.94. The current ratio is 2.27 based on Revenue estimate for 2024 of $45,397M, Revenue per Share of $21.36 and a stock price of $48.55. The current ratio is 17% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable and maybe cheap. The dividend yield tests says that the stock price is cheap but that is not confirmed by the P/S Ratio test which says that the stock price is reasonable and above the median. Other tests range from cheap to reasonable, above and below the median.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (5), Hold (8) and Sell (2). This is quite a wide range. The consensus would be a Buy. The 12 month stock price consensus is $52.13 with a high of $60. and low of $35.00. The consensus price of $52.13 implies a total return of 14.91% with 7.37% from capital gains and 7.54% from dividends.
There are 12 recommendations on Stock Chase for 2024, with two Do Not Buy, two Holds and the rest Buys. It is on two of the 3 dividends stock lists I follow. MoneySense does not have this stock on their latest list. With the Do Not Buys, the analysts like another utility better. Stock Chase gives this stock 5 stars out of 5. Puja Tayal on Motley Fool says buy for passive income. Rajiv Nanjapla on Motley Fool says Enbridge is a no-brainer buy. The company put out a press release via Newswire about this company’s fourth quarter of 2023.
Simply Wall Street via Yahoo Finance says dividend increases will probably be restrained in the future because the company is not covering their dividends well. They are not the only ones to say this. Simply Wall Street has three warnings of interest payments are not well covered by earnings; dividend of 7.55% is not well covered by earnings; and shareholders have been diluted in the past year. Simply Wall Street gives this stock 3 and one half stars out of 5.
Enbridge owns extensive midstream assets that transport hydrocarbons across the U.S. and Canada. Its pipeline network consists of the Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines. The company also owns and operates a regulated natural gas utility and Canada's largest natural gas distribution company. The firm has a small renewables portfolio primarily focused on onshore and offshore wind projects. 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 Friday, March 22, 2024 around 5 pm. Tomorrow on my other blog I will write about Passive Investing and Markets.... learn more on Thursday, March 20, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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