ENBRIDGE INC. $61 (Toronto symbol ENB; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 855.0 million; Market cap: $52.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.0%; TSINetwork Rating: Above Average; www.enbridge.com) gets 90% of its revenue from pipelines that pump oil and natural gas from Western Canada to Eastern Canada and the U.S. The remaining 10% mainly comes from distributing gas to 2.1 million consumers in Ontario, Quebec, New Brunswick and New York State.
The company plans to spend $44 billion on new pipelines and expansions between 2014 and 2018. It completed $9.8 billion worth of that total in 2014 and expects to finish another $8.7 billion worth this year. Enbridge has already secured shipping contracts for $34 billion worth of these projects, which cuts its risk.
These outlays exclude the $6.5-billion Northern Gateway pipeline, which would pump crude from Alberta to the B.C. coast. Regulators have approved the line, but it still faces a number of political and other hurdles. If Enbridge decides to build Northern Gateway, it could begin operating in 2019.
Meanwhile, the company earned $468 million in the three months ended March 31, 2015, down 4.9% from $492 million a year earlier. Per-share earnings fell 6.7%, to $0.56 from $0.60, on more shares outstanding.
Enbridge’s oil and gas pipelines saw lower earnings in the latest quarter, but the gas-distribution business’s profits rose. Revenue declined 24.6%, to $7.9 billion from $10.5 billion.
However, the company expects its per-share earnings to rise 15.8%, from $1.90 in 2014 to $2.19 in 2015, as its starts up more new projects. The stock trades at 27.9 times that forecast. Enbridge also trades at just 10.0 times its projected cash flow per share of $6.10.
The higher cash flow will also give the company more cash for dividends. The current annual rate of $1.86 yields 3.0%.
Enbridge is a buy.
