enbridge

BMO S&P/TSX Laddered Preferred Share Index ETF, $10.93, symbol ZPR on Toronto (Units outstanding: 90.6 million; Market cap: $990.3 million; www.etfs.bmo.com), holds Canadian floating-rate preferred shares. Issuers include Bank of Montreal, Enbridge, BCE, TransCanada and Canadian Utilities. The fund’s MER is 0.45%, and it currently yields 4.9%. Note that the dividends you receive from this fund benefit from the Canadian dividend tax credit. Floating-rate preferred shares pay dividends that fluctuate with changes in interest rates. The dividend rate may range from 50% to 100% of (usually) the prime bank rate. As interest rates rise, so do floating-preferred dividend yields....

ENBRIDGE INC. $52.76 (Toronto symbol ENB; Shares outstanding: 856.7 million; Market cap: $45.4 billion; TSINetwork Rating: Above Average; Div. yield: 3.5%; www.enbridge. com) continues to move ahead with the major reorganization it announced in December 2014. The company plans to transfer some of its pipelines and wind farms to 19.9%-owned affiliate Enbridge Income Fund Holdings Inc. (Toronto symbol ENF). This company owns 42% of Enbridge Income Fund (Enbridge Inc. owns the remaining 58%), which holds a variety of businesses, including oil and gas pipelines and solar and wind farms. Asset transfers like this, called drop-downs, free up cash the parent company can use for new projects. The affiliate also benefits because the new assets’ cash flow helps it maintain or raise its distributions to investors....

ENBRIDGE INC., $52.32, Toronto symbol ENB, continues to move ahead with the major reorganization it announced in December 2014. The company plans to transfer its pipelines to 19.9%-owned affiliate Enbridge Income Fund Holdings Inc. (Toronto symbol ENF). This company owns 42% of Enbridge Income Fund (Enbridge Inc. owns the remaining 58%), which holds a variety of businesses, including oil and gas pipelines and solar and wind farms. Under the proposal, Enbridge will transfer pipelines that pump oil sands crude to the U.S., along with wind farms in Alberta and Quebec, to Enbridge Income Fund....

ISHARES MSCI CANADA INDEX FUND $25.90 (New York symbol EWC; buy or sell through brokers; ca.ishares.com) holds the stocks in the Morgan Stanley Capital International Canada Index. The fund has a 0.48% MER and yields 1.6%.

The index’s top holdings are Royal Bank, 7.2%; TD Bank, 6.4%; Valeant Pharmaceuticals, 6.0%; Bank of Nova Scotia, 5.1%; CN Railway, 3.9%; Suncor Energy, 3.3%; Enbridge, 3.3%; Bank of Montreal, 3.1%; and Manulife Financial, 3.0%.

If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index Fund (see previous page). You’ll pay about a third of the management fees.

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ISHARES S&P/TSX 60 INDEX ETF $21.18 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.18% of assets, and it yields 3.0%.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include. The index’s top holdings are Royal Bank, 7.9%; TD Bank, 7.1%; Valeant Pharmaceuticals, 6.6%; Bank of Nova Scotia, 5.6%; CN Railway, 4.2%; Suncor Energy, 3.6%; Enbridge, 3.6%; Bank of Montreal, 3.4%; BCE, 3.3%; Manulife Financial, 3.3%; Brookfield Asset Management, 2.8%; and Canadian Natural Resources, 2.6%.

iShares S&P/TSX 60 Index ETF is a buy.
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Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

With $44 billion earmarked for new projects, Enbridge builds up its cash flow and keeps our rating as one of Canada’s best dividend stocks.

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.

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In addition to TransCanada (see page 51), we like these three pipeline operators’ prospects. All of them are investing in projects that will spur their cash flows—and dividends—for years to come. 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....

Innergex Renewable Energy, $11.03, symbol INE on Toronto (Shares outstanding: 100.9 million; Market cap: $1.1 billion; www.innergex.com), is a recommendation of our Canadian Wealth Advisor newsletter. We place Innergex in the Utilities sector, a broad area that includes telecoms, pipelines, power generators and so on. The company generates electricity, but it focuses on renewable energy, including hydroelectric plants, wind farms and solar power. That puts it in something of a niche category among utilities that includes stocks like Algonquin Power & Utilities, $9.73, symbol AQN on Toronto, and Northland Power, $16.99, symbol NPI on Toronto....