TD's Notes Event
Enbridge Inc. (ENB) released its 2022 financial guidance. ENB announced that
it has sanctioned $1.1bln of new capital projects, and provided an update on
strategic priorities with its investor day. We highlight select takeaways in this note.
The annual dividend will increase to $3.44, growing 3%, effective March 1, 2022.
Impact: SLIGHTLY POSITIVE
2022-2024 Guidance Introduced: Management expects 2022 DCF per share of
$5.20-$5.50 and EBITDA of $15.0bln-$15.6bln, with 2021 guidance unchanged.
Drivers of this expected performance in 2022 include volume recoveries in
ENB's Liquids Mainline system, a full-year contribution from L3R surcharge and
acquired assets in the Ingleside Energy Centre transaction, Gas Transmission
projects brought into service in 2021, customer growth in the gas utility, and
continued moderation of losses in the Energy Services business. Management
also communicated its intent to file a normal course issuer bid that allows ENB
to repurchase up to $1.5bln of common shares by the end of 2021. Our financial
forecasts appear to be substantially aligned with management's guidance.
Dividend Update: The 3% dividend increase to $3.44 annually is what we
modelled for 2022, with the Board expecting to continue to ratably grow the
dividend up to the level of average annual DCF-per-share growth and maintain
its dividend policy payout at 60-70% of DCF. The dividend outlook reflects ENB's
confidence in its 5-7% average DCF-per-share growth outlook through 2024.
Financial Forecasts Updated: We are planning to refine our model with the
details of the investor day at the next comprehensive update.
TD Investment Conclusion
The company's resilient business model, long-life assets, and ability to pivot to meet
continued industry changes, including a transition to a lower-carbon future, should
warrant a premium valuation. Over the long term, we expect ENB to continue to have
a strong competitive incumbency due to its geographic footprint, scale, connectivity,
and diversification, and we believe that this positions it to play a role in North
America's contracted and regulated energy infrastructure evolution to support global
long-term climate-change goals and continued energy demand.
Recommendation: BUY
Risk: LOW
12-Month Target Price: C$57.00
12-Month Dividend (Est.): C$3.34
12-Month Total Return: 23.2%