Enbridge (ENB.TO)

In the energy sector and it has gotten beaten up pretty badly in the initial stages, but this is a utility. It is carrying oil and will continue to operate its pipelines, both in Canada and the US. The Northern Gateway is probably a dead issue. Thinks the dividend is okay and the company is safe.

The dividend has been growing quite a bit over the last 10 years. They finally accepted that they have to diversify outside of pipelines. The next phase for their growth will be renewable resources, which could hold their stock back. It is safe and secure and it is a regulated utility. Earnings will fluctuate all over the place so you have to look at free cash flows to determine the health of the dividend.

Not one of his favourite stocks. Has a lovely 4% yield, but has a premium multiple, so is open to some disappointment. People are definitely flocking to pipelines and utilities, because of their dependability, and are bidding them up in price. He would not be buying any more at these levels. This would be a Soft Hold.

Has always liked this. It is one of the companies he sold, but is now building back a position. A great Canadian company with really good management. At this price, it is a really good entry point. Dividend yield of 4.2%.

There was a question about smaller companies being able to pay their bills for transport in the pipelines. He sees this as an opportunity in ENB-T. It is one of his favourites. He currently prefers TRP-T at current levels. Longer term ENB-T should do well.

The $40 range was a great buying opportunity. Not cheap, trading at around 23X earnings, but have been able to show that they can grow their earnings. Have a big CapX program going on that they can easily fund without hurting their payout ratio. A very good, consistent company over a long period of time.

Pipelines. Which one for a long term hold? ENB-T is probably the one to bet on. He owns 4 pipelines in his fund. 8% growth profile over the next 10 years, 4% dividend. This is probably his number one for the long term.

We are seeing a downtrend break. It is pretty positive. We would want it to be more robust in breaking out. There is a double bottom, however.

His favourite pipeline. Has the best earnings growth over the next 5 years of 8%-10%. They have said they would increase the dividend commensurate with earnings. He likes both those things. The worry is that as they grow, they do equity issues and debt financing and they keep doing them, and there is going to be more equity over time, which might blunt it a little bit. Dividend yield of about 4%. Would add at under $45. Thinks it will be in the mid-$50 by the end of the year.

If you look at the history of busts in the oil industry, when there is a bust like we have had you generally don’t see the market bottom and then turn around and take off and not come back. In the 80s once and in the 90s once, oil dropped 68%-69% over a course of about 1 year. In both cases you had an approximate 50% bounce off the bottom, and then the industry had to consolidate for many years to work out excess supply and excess costs. We have had a great bounce in a lot of the stocks, which is given a lot of people an exit opportunity. He would prefer to focus on things that benefit if prices stay relatively low.

The share is off significantly. Great dividend growth with almost unprecedented growth over the years. They did an IPO and the shares did not ever come down to the issue price and was 6 times oversubscribed. 10-12% dividend growth from a 5% yield over the next few years. They just completed two big pipeline projects last year.

All the pipelines have been beaten up on the basis that if the prices are down, they’ve got a problem. The truth is, they don’t have a problem in the immediate term, but it does dim their growth prospects. This is politically risky. A great company, but chances of anybody getting a great pipeline approved have dimmed.

This is a company that is guilty by association. It has a tremendous balance sheet, is well managed and the assets are excellent. With any kind of rally in energy this company will do very well. You will do fine in this market right now.

This deserves an award for talking about a great story and getting the investment community on board. Of course the street is going to love this company because it is the biggest pair of commissions and underwriting fees out there. It is a huge labyrinth of special-purpose entities, spinoffs, new opportunities to raise money. It is just Financial Engineering 101.

You don’t buy this if you worry about oil going to $25, because the stock would get weaker. He always makes sure that he has a long-term time horizon in mind when looking at these companies. Doesn’t think $25 oil is sustainable over a 5-10 year time horizon. They have capital requirements they are going to have to fund at some point. There is speculation they may come to the market with an equity issue. Even if they don’t get the money, given their vast presence in North America and oil distribution, you can rely on the cash flow. Dividend yield of 4.77%.