RE:RE:RE:RE:RE:The leverage factorSplits offer a unique opportunity to investors that pay attention.
One can take advantage of the time lag between the real time value of the NAV and the reported value of the NAV because very few investors don't bother with the minutiae.
Splits provide a second opportunity for investors that pay attention in that the range in the premium of the share price to the NAV can be traded.
What really makes ENS special IMO, is that you can ignore all of the above (which is a bit of work) and just collect the higher yield through ENS (vs ENB) and enjoy the 1.6x to 1.8x leverage on ENB's growth.
The management at ENB have made it very clear that they are returning to their conservative ways after their forays into Spectra and replacing Line 3. ENB has lots of profitible "in-line" projects that they can self-finance which won't create headlines. As such, I expect that the volatility that ENB has been experiencing is about to flatten out. What that means is that shareholders can expect ENB to grow (5% to 7% DFC growth as per mgmt) going forward. That in turn means that ENS should experience 1.6x to 1.8x the growth rate of ENB.
So, you end up with an ultra-conservative investment that pays a great yield and should experience growth of a minimum of 8% (5% DCF x 1.6x).
The prime concern of any holder of the Common portion of a Split is the concern of a deterioration of the NAV due to the Common shares paying out more dividends than they take in.
I ran a spreadsheet on the month by month cash flows for ENS and on average, they take in about $0.10 more per month than they pay out. My calculations included the costs of the MER and the fact that ENS is only 97.8% invested in ENB (they have to keep a small amount of funds available for day to day operations) which reduces the income from ENB.
Since the amount of the dividend paid out to the Preferred shares is fixed, every time ENB raises its dividend, all of the increase goes to ENS.A . At some point, ENS is likely going to have to raise the monthly dividend again.
I bought a chunk of ENS last week. As long as nothing changes in the philosophy of ENB's mgmt (slow dependable growth) and Middlefield doesn't start playing games, I will continue to add more shares of ENS.