Enbridge Inc T.ENB

ENB target of $66.80 is just the beginning

[Marner16]

Fiddy:  my bad....I write so fast that I often make mistakes...I really should read my posts before I hit Post

I wrote:  It is inconceivable to me that the yield on the shares will gravitate back down to 5% and below as things settle down.  Do the math and smile

It should have read: It is inconceivable to me that the yield on the shares will NOT gravitate back down to 5% and below as things settle down.  Do the math and smile

I absolutely believe that the ENB share price is heading to 20x (the multiple attached to a 5% yield) the dividend which turns out to be 20 x $3.34 = $66.80 per share.  I don't know when the price will get there, but it pretty much has to given the self-funded CAPEX program of $16 is well under way.  If The Buyer is Buffet, it will be sooner than later.

My confidence is backstopped by the following reasons:

1) If you check back the last 25 years, the Yield for ENB has only been above 4% for short periods of time.  For example, from 2000 to 2015, a period of 16 years (64 quarters), the yield was only above 4% for ten quarters and only above 5% for one of the quarters.  The yield really only began to push up with the acquisition of Spectra as the debt load increased. Now that the one time costs of the Spectra deal has been fully absorbed, and ENB is endlessly preaching about being conservative, there is no reason for the share price to yield more than 4%

2) With interest rates scheduled to be close to zero for years to come (so far the US has only committed to low rates until 2023 but the effect of the trillions of dollars of debt being created will overhang the economy for a generation), a 5% yield will inevitably be seen as a very generous dividend. 

3) While fixed income investors may not like the idea of a NCIB due to it limiting the ability to raise the dividend by higher amounts, as ENB begins to buy back its shares, the total number of shares outstanding will decrease which will have to effect of increasing DCF and earnings. 

4) If you read between the lines, the CEO mentioned today that the company will be back to bumping the dividend by 5% to 7% until 2023 and beyond from the increase in self-funded DCF.  I keep mentioning self -funded because that implies there is no need to create additional shares

5) The CEO reiterated today that ENB is going to grow its DCF by 5% to 7% for the forseeable future by means of making a lot of small, low risk investments.  I view the CEO's comments as the opposite of a "death by a million little cuts" because the company is going to build via the implentation of a million little efficiencies.

6) I think if you read between the lines in the CEO commentary, I think he implied that the dividend will grow at 5% to 7% going forward on top of everything else.  The Buyer that has  spent $20 billion accumulating shares of ENB over the last 5+ months gets it. 

I could go on and on, but I lost Sarge after the first few lines and people have better things to do than read about the dozens of nuances of ENB that provide me the confidence to make ENB one of my core positions.  I used to make a living focusing on the nuances because it is the nuances that provide the edge. 

When the market wakes up to what ENB is doing, fund managers will stop tying ENB to the "oil is bad" commentary and go back to tucking ENB shares away.  Or maybe the market just needs to read that Buffet has bought up 30% of ENB as the market responds better to a kick in the ribs than a gentle scratch of the ears.  

Lots of posters talk the talk but don't walk the walk.  I won't tell you how many ENB shares I have purchased as it would either be viewed as bragging or that I'm lying, but it is a lot.

[FreeAtFiddy]

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