Enbridge (ENB.TO)

All these interest sensitive stocks have been under pressure lately. There were some rumbles on this one as their debt was getting too high, yet they had a nice analyst day. They raised capital and said they are going to show double digit dividend growth for the next 5 years. He is quite positive on these kinds of names.

Enbridge (ENB-T) or Enbridge Income Fund (ENF-T) for a 45-year-old? If he had to choose between the 2, he would probably select Enbridge (ENB-T) for the growth side and Enbridge Income (ENF-T) for the dividend.

ENB-T vs. IPL-T. Oil pipelines are not going away and pipelines are safer than rail. The question is where interest rates are going because people buy them for the dividend. He believes rates are not going up very far so the yields remain quite compelling. A Pipeline should be a key part of every portfolio and ENB-T would be his preferred because it has been so beaten up and the yield is higher.

Longer-term interest rate is what is going to affect this. Short-term rates doesn’t really affect them. He likes the company. The dividend yield of 5.3% is very assured to grow in the high single digits, if not the low double digits. If it even grows 8% a year for the next 5 years, you are looking at an 8%-9% yield, and the stock won't trade at that amount of a yield, so you will get some capital growth.

People love to hate it. The biggest pipeline company in North America. Most of its distribution had been oil but an auction this year made it bigger in Gas. They are selling some assets they bought to bring down the debt. Line 3 is in bad need for replacement into the US and if that goes ahead it will be good for the stock. (Analysts’ target: $60.00).

The company has been able to clearly demonstrate that there is still a little bit of a capital overhang, but in terms of where capital markets are, it is not multiples of billions. They should be able to really fund their growth program through the vehicle as they can lay it out. Dividend yield of 5.4%. (Analysts' price target is $60.)

Enbridge (ENB-T) or Inter Pipeline (IPL-T)? Looking at the long-term track record of dividend and earnings growth, this is by far is the best. It’s been pretty weak after their big acquisition. A lot of US shareholders were selling shares, and then the Shorts got into it and really started Shorting it. There were concerns around the balance sheet and the company was selling off $3 billion worth of assets. A very capital-intensive business. This is the national champion and Best of breed in Canada. Prefers this one.

This has been a tax loss selling target. There has been concern over their debt, funding of their dividend growth, whether they would be able to continue to grow at 10%, line 3 regulatory approvals, funding for their projects. Thinks it has gotten oversold and is a bit of a coiled spring. 2018 Line 3 should hit a lot of regulatory milestones. The main line volume outlook should probably clear, and he models a decent growth rate over the next couple of years. Trades at a 9.2% 2019 free cash yield, which is cheap for this. Dividend yield of 5.4%. (Analysts’ Price Target is $60.)

Why is there such a disconnect between the flat earnings trend in the last 4 years, the high rising debt levels, and that they have an extremely generous dividend policy? A lot of people are asking the same question. This one is not on his "favourites" list at all. The political situation for this company and TransCanada (TRP-T) is that the politics of the world have become very negative for large pipelines. He thought this company's Northern Gateway was doomed from the start. They are not paying enough attention to the political aspects and the political environment. He would not recommend this.

Inter Pipeline (IPL-T) or Enbridge (ENB-T)? If she had to choose between one or the other, her preference would be this. It has been held back by the uncertainty of the financing of their capital program and that has now been alleviated. Also, they are more diversified getting into natural gas.

She likes the Spectra acquisition they did as it diversified them into the US and international gas. They issued $1.5 billion in a new equity issue amongst 3 private institutions, so the overhang on their funding requirements has been alleviated. Dividend yield of 5.4%, and have confirmed dividend growth of 10% annually to 2020. (Analysts' price target is $60.)

(A Top Pick June 20/17. Up 2%.) One of his few plays in energy. He likes it because of the substantial discount. It had come down from its high of $65. They have the takeovers and the rebuilding of Line 3. The stock held back because there was a lot of financing to come. A lot of that is behind them now and this can now gradually start to appreciate. Dividend yield of 5.5%.

Has owned this since it became public, and adds and trims depending on the value of the stock. Made a big US acquisition and the balance sheet got out of whack, so there was some concern about the rate of growth of the dividend. They’ve announced they are going to do some asset sales as well as doing a private equity issue to its 3 largest shareholders, along with an equity issue in the Enbridge Income Fund (ENF-T). Did a preferred share issue and are likely to do some more hybrid debt/preferreds. They’ll get the balance sheet in order in the next couple of years. There is a lot of growth expected on the US side of things, mostly related to natural gas. 5.5% dividend yield.

He has no idea where oil is going to go. There are so many competing forces. In the next recession we will see oil go to $20 - $30. In 2018 he guesses it will be between $50 and $75 a barrel. He likes pipelines more than exploration companies as they are less reliant on the price of oil. He would not be adverse to adding ENB-T at this point.

It is one of those great Canadian companies that fell on hard times. Pipelines are not getting completed as fast as the market expected. They have projects coming up that support their growth. The stock got tanked because of concerns about raising equity. They fixed the balance sheet. This is wonderful – better than a bank. (Analysts’ target: $60.00).