Post by
Obscure1 on Dec 18, 2023 6:17pm
Friday update
The Live Premium to the NAV is a bit over 10%.
IMO, the 10% premium is a small price to pay for a yield that is 2/3 higher.
However, using one data point such as the differential in yield is irresponsible.
When contemplating buying a Split, it is prudent to consider both the risk and the leverage involved.
RISK: The risk in owning ENS is higher than owning the underlying security (ENB) for times when the Unit NAV drops below $15. I personally don't see that happening with the information that is available today. As such, I don't attach a lot of value to risk in terms of collecting monthly dividends from ENS
LEVERAGE: Currently, a 10% move (up or down) in the price of ENB will generate a 15% move in the price of ENS based upon its current 0.39 multiplier. Whether that is a good thing or a bad thing depends upon one's belief in what direction they think ENB's share price will move. My one year price target for ENB is $55 so I think the leverage of owning ENS is a good thing. However, the market has a way of humbling us all from time to time.
Before the recent Raise, the multiplier was 0.44 which meant that a 10% move in ENB would cause a 17% move in ENS. I'm a bit disappointed that Middlefield has been slow to reinvest the $38 million that they raised recently. Maybe Middlefield is expecting a pull back in the share price of ENB and is waiting to buy it cheaper.