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Monday, June 26, 2017, 08:22:53 Monday’s TSX breakouts: A stock yielding 4.7% with a 20% upside forecast
Discussed today is a company that appeared on the negative price breakouts list in mid-June. The company offers its shareholders an attractive, secure 4.7 per cent dividend yield with double-digit dividend growth forecast. In addition to dividend income, analysts are anticipating a double-digit price return. In recent weeks, the chief executive officer purchased $1-million worth of shares in the public market. The security highlighted below is Enbridge Inc. (ENB-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Calgary-based Enbridge is the largest energy infrastructure company in North America offering regulated gas distribution and has an extensive network of crude oil, liquids, and natural gas pipelines. In February, the company completed the merger with Spectra Energy Corp. The combined company will feature a low-risk business model with 96 per cent of the company’s cash flows generated from long term take-or-pay, cost-of-service, or fee-based contracts resulting in predictable cash flows.
Earlier this month, on June 8, the company provided investors with a mid-year update, outlining three key organizational priorities: 1) organic growth; 2) minimize risk; and 3) realizing cost efficiencies.
Al Monaco, the president and chief executive officer, highlighted the management’s priority of keeping a “low-risk profile” stating, “There's a lot of talk and focus about growth today, but there's an equally important part of the shareholder value equation for us, and that's minimizing risk to ensure we achieve the lowest cost of capital, and that's critical, as you all know, in maximizing opportunities to make highly accretive investments. Minimizing risk also ensures stability and predictability of cash to support a highly transparent dividend outlook.”
Mr. Monaco also emphasized the need to “streamline the enterprise to optimize returns and cost of capital”. He stated, “We estimated run rate synergies of $540-million out of the Spectra deal. We're pleased , very pleased, in fact, with the progress so far... We expect to get 40 per cent to 50 per cent of the $540-million (in synergies) this year, another 30 per cent in 2018 and the rest in 2019.”
Before the market opened on May 11, Enbridge reported first-quarter financial results that were relatively in-line with expectations. Adjusted earnings before interest and taxes (EBIT) came in at $1.515-billion, near the consensus estimate of $1.552-billion. Available cash flow from operations (ACFFO) was $1.03 per share. For 2017, management anticipates it will report EBIT between $7.2-billion and $7.6-billion, and ACFFO between $3.60 per share and $3.90 per share.
The company’s shares are dual-listed, trading on both the Toronto Stock Exchange and New York Stock Exchange under the ticker ENB.