Thursday, June 14, 2007

Dividend Growing Stocks – IV

Enbridge (ENB) is an energy distribution, transportation and services company. Core businesses include distribution of natural gas and transportation of liquid hydrocarbons.

-paid a dividend for over 50 years
-dividend has grown an average of 10% yearly
-currently yielding 3.40%
-65% payout ratio
-95% of their business is regulated
-PE 19X
-Stable credit rating (A-, Baa1, A)
-click here for a complete dividend history 1953 – 2006

I don't currently own ENB however it is one I would eventually like to add to my portfolio.

12 comments:

FourPillars said...

Who cares about dividends? How's the kid? Is he walking yet?

Mike

MillionDollarJourney.com said...

Do you think that ENB is a good buy @ current levels? I bought ENB @ this level around 2 months ago.

FT

Middle Class Millionaire said...

Mike,
Ha ha ya he's a quick learner he's running all over the place (at this pace he'll probably be applying for university next week). Seriously though he's healthy and doing great at what he should be: sleeping, eating and pooping.

FT,
I think ENB is a great long term hold but I feel it is a little too expensive at these levels. I can’t see any catalyst to get this one moving higher as it’s currently trading at 20X projected 2007 earnings and 19.3X projected 2008 earnings, which I think is high for a utility. This means there will be very little earnings growth over the next couple of years additionally it appears that interests are going to move up which would also be a negative for this name. I love the company just think the stock is a little pricey.

MillionDollarJourney.com said...

At what PE range do you think that Utilities show "value"? 10-15?

FT

Average Joe said...

I did an analysis of ENB as well.

From a dividend yield perspective, the stock is in fact looking cheap. The 10 year average high yield is 3.02%.

Current yield is around 3.38%.

Average Joe said...

I did an analysis of ENB just the other day. From a dividend yield perspective, the stock looks cheap. The 10 year average high yield is 3.02%. And that has been fairly consistent.

The stock is currently sitting at a dividend yield of around 3.38%.

Middle Class Millionaire said...

FT,

I think that a forward PE of 10 to 15X would probably be reasonable. Current estimated 2007 PE is around 20 and 2008 is around 19.4. So for me personally ENB is still quite over priced (but a great company). I own TRP and am continuing to hold but also feel that it is a little overpriced (but not as much as ENB)


Average Joe,

Although their dividend yield might be at the higher end of their historical range where is their payout ratio compared to a 10yr average? I haven’t calculated it over a 10 year period because it’s too time consuming but have done it for 2002 to 2006. In 2002 their payout ratio was 42%, in 2003 it was 41%, 2004 it was 47%, in 2005 it was 63% and in 2006 it was 64%. So although their yield is slightly above the historical average their payout ratio has increased significantly. I think ENB is a great company but not a great stock at this moment in time (even for dividend growth investors)

Average Joe said...

10 years ago, the dividend payout ratio was actually 69%. And over the last 10 years has been as high as 76% (and as low as 50%).

So at today's dividend payout ratio of 66%, they seem to be back where they were 10 years ago.

And over the last 4 years, ENB has been growing their dividend by roughly 20% per year.

Middle Class Millionaire said...

Average Joe,

If you don't mind me asking where did you get your numbers?

"And over the last 10 years has been as high as 76% (and as low as 50%)"

Unless I calculated incorrectly, it was as low as 42% in 2002, and 41% in 2003.

Average Joe said...

I get asked this question all the time, so I plan to write a post about it.

I use various sources such as Yahoo Finance and ADVFN Financials, but the main source is my subscription to BetterInvesting.org.

As a member, you get access to their S&P Stock Service. However, I have noticed errors in the past. For example, for BMO, it showed a couple of dividend decreases in the last 10 years. I found that very bizarre. So I went to the BMO investor relations site and sure enough, they have consistently raised their dividends.

Warren said...

I believe that oil/energy stocks (particularly Canadian dividend paying ones with the tax benefit) are great long term investments, but the prices might be a little high now due to crude prices. I don't own ENB but I do own others. If oil takes a price dip, stocks like ENB should dip a little in the market's typical irrational response, and that would be a great time to jump in. Just my 2 cents.

QUALITY STOCKS UNDER 5 DOLLARS said...

Dividend growing stocks seem like a good idea.