Enbridge (ENB.TO)

TransCanada (TRP-T) or Enbridge (ENB-T) for a 10-year hold? Both companies have done something very interesting by making big US acquisitions. He likes this one because there is some very good growth and management has been spectacular.

(A Top Pick Oct 8/15. Up 8.2%.) This is doing all the right things. They got beaten down with all the other pipeline companies, and have come back significantly over the period. He is looking for dividend increases of 10% in 2017.

This has a balance sheet that is very highly levered. The risk, of course, is that interest rates go up, which pummels earnings. At the same time, because this is regulated, when interest rates go up, the regulatory authorities tend to allow them to increase rates faster.

Has always admired this company. For a long time, he didn’t own any because the price seemed to be well ahead of what his expectations were. He finds that generally true with pipelines today. The multiples are at 20X earnings in a lot of cases. On the other hand, you have the consistency of earnings, the expansion of the rate bases, and this company probably has been one of the better managed ones. Because this has a fairly significant position in the US, he wouldn’t hesitate to own this for the long-term.

Their acquisition of Spectra gives them better growth visibility beyond 2018. He likes the deal. Sees the name growing 10% 2016-2018. If you are long-term and have big capital gains, stick with it. You might consider Selling a Call, in order to buy it cheaper. Doesn’t think it is the hottest stock right now. Dividend yield of 3.8%.

His model price is $40.56, a minus 27%. This doesn’t include their Spectra acquisition, which may take a year or more. There is no real fundamental value now. If we get US treasuries going back up, your dividend yield of about 4% is not going to look too good.

Merging with Spectra Energy, which will give them a more balanced state of about 48% natural gas and 40% oil. With the federal government approving the pipeline to Vancouver, this company lost Northern Gateway. You are looking at a better balance, and also there is going to be a new expansion of pipeline down into the Chicago area, which is going to offer more capacity for Saskatchewan. Americans are starting to talk about a pipeline running to the east coast, which would tie into Chicago. He is quite positive on this company and is looking at it again.

Dividend play? This is one of those great companies, and the question is, is it in as good an industry as it has been historically. They’ve had a wonderful track record of paying dividends. Made significant acquisitions in the US, which he likes. He is not adding to his holdings as he thinks he can do better elsewhere when looking for yield.

This is a great company. Trading at 23X earnings. Their acquisition of Spectra Energy was very smart. Thinks they were uncomfortable with the situation in Canada and preferred to be operating in the US. Today, Northern Gateway was rejected by the government, but they did approve Line 3 with conditions. Expects that they feel their growth will come from someplace else, not Canada. He continues to like this stock.

Feels energy and pipelines will do well in a Trump world. This one has a nice balance of projects, and has been a very solid, stable player. It has shown growth unlike many of the other dividend plays. Has a big backlog of projects. Really well-managed company.

He likes this name. It has held in a lot better, compared to the US utilities or REITs, which have been clobbered, especially since the end of the 2^nd quarter of 2016.

(Market Call Minute.) The big project for this is the Line 3 replacement that has been facing some red tape. Now with a Trump election, it looks like that is coming off. He likes the company.

He is short. They have high debt. He does not see much growth in pipelines. It is an expensive stock. The dividend has been chased up to a very high valuation.

This is a good example of how seasonality works most of the time, but not all of the time. Historically it does very well between now and about the 1^st week in January. This year, not so much. It has a long-term upward trend, but during the last month or so it has been trading below its normal level. Currently it is going sideways at a time when it should be going higher. Not one of his favourite situations. Any sort of strength in the next little while would be an opportunity to take some money off the table.

It scores really well on price momentum. The problem is that their valuation is high. This keeps him from being a buyer. 25 times PE. They always have a lot of debt. They missed on their most recent quarter. They should be sensitive to a rising rate environment.