Enbridge Inc T.ENB.PR.Y

Gordon Pape - 2 weeks ago

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Gordon PapeGordon Pape • 3rd+ • 3rd+ Acclaimed Author and Editor of Canada’s Most Highly Regarded Investing NewslettersAcclaimed Author and Editor of Canada’s Most Highly Regarded Investing Newsletters 2w • Edited •

2 weeks ago

 

 

 

After two years in the doldrums, pipeline stocks are starting to move higher.

This is what I wrote about in the most recent edition of my popular investing newsletter, Internet Wealth Builder (IWB). It will also appear this week in The Globe and Mail, online and in print.

Here's some of what I had to say:

We’re finally seeing some significant upward movement in the pipeline sector after two years in the doldrums.

My pipeline picks are all trading near their 52-week highs, thanks to good financial results and an improving interest rate environment.

Because these are capital-intensive companies, they are highly interest rate sensitive. All were hard-hit by the rapid rise in rates in 2022-23 as central banks fought to tame high inflation. But now it’s a new ball game. The Bank of Canada has already cut twice, and the U.S. Federal Reserve Board is widely expected to move at its September meeting now that U.S. inflation has fallen to 2.9 per cent.

Unless there is a recession, rates won’t fall as quickly as they rose and are unlikely to settle anywhere near the lows we saw back in 2020-21. But any downward shift is a plus for pipeline stocks and for other interest-sensitive securities like utilities and REITs.

Here’s an update on one of my pipeline picks, Enbridge Ltd. (ENB-T).

Originally recommended on Aug. 22/99 at $8 (split-adjusted). Closed Friday at $52.98.

Background: Enbridge Inc. is one of the largest energy infrastructure companies in North America.

Performance: After a dip in April, the shares have been moving higher and recently touched a 52-week high of $54.49.

Recent developments: The company reported a strong second quarter, beating consensus estimates for distributable cash flow (DCF) and adjusted EBITDA.

Dividend: The stock pays a quarterly dividend of $0.915 per share ($3.68 a year) to yield 6.9 per cent at the current price.

Outlook: The company recast its 2024 financial guidance. Adjusted EBITDA is expected to be between $17.7 billion and $18.3 billion (previously $16.6 billion to $17.2 billion). This adds incremental contributions from the two U.S. gas acquisitions that have closed and assumes a Q3 closing for the third.

The DCF per share guidance range of $5.40 to $5.80 is maintained.

Action now BUY