Every Tuesday we bring you “Best Canadian Stocks” from one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor. Today we report on a pipeline whose investment in expansion keeps it among Canada’s best dividend stocks.
In addition to TransCanada which we reported on a week ago (see the article here), Enbridge is another pipeline operator whose prospects we like. The company is investing in projects that will spur its cash flow—and dividends—for years to come.
ENBRIDGE INC. (Toronto symbol ENB; 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.
The company also plans to increase the capacity of a proposed pipeline project that will pump crude from oil sands projects in Alberta. It will mainly do this by increasing the diameter of part of the pipeline and boosting another section’s pumping power. These moves will also cut the project’s overall cost by $400 million, from $3.0 billion to $2.6 billion.
Rich with dividend stocks
No matter what our economy is doing, Canada is rich with dividend stocks. And it really helps to know which ones have the greatest potential for growth in both income and capital gains in the months and years ahead. You find out in The Successful Investor, where Pat McKeough recommends stocks like Enbridge whose strong fundamentals and stream of new projects make them the best picks for you.
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Top Canadian dividend stocks: Higher cash flow due to supply more cash for dividends
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%.
Recommendation in The Successful Investor: BUY.
Comments
Todd
Does anyone have an opinion on Seadrill(SDRL:NYSE) ?
They cut div from 40% to 30%, a billionare
(Fredrickson?) bought several million more shares.
Learn everything you need to know in
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Does anyone have an opinion on Seadrill(SDRL:NYSE) ?
They cut div from 40% to 30%, a billionare
(Fredrickson?) bought several million more shares.
Veresen beats Enbridge