E Split Corp T.ENS

The long range outlook for ENS

[Obscure1]

ENS price remains sticky.  I expect it will continue to remain that way until we see interest rate cuts.  

The BoC didn't cut rates today but the "watch for higher inflation" note that we have seen for the past few announcements was removed.  With some economists predicting the Cdn economy to slip into recession shortly, it wouldn't surprise me to see a rate cut at the next BoC meeting on March 6th.

ENB isn't immune to a recession, but it is always well positioned. 

Meanwhile, ENS goes ex-dividend again next Tuesday.  

With so many question marks about the world on so many levels, owning ENS is a place of comfort for me. 

ENS will pay out about $0.75 more than it take in during 2024.  In 2025, ENS will likely pay out about $0.70 more than it takes in.  At that rate, ENS should be flat on a cash flow basis in 15 years if the gross dividend increase in ENB shares remains linear.

Assuming the ENB dividend will continue to grow at 3% or more each year the actual dollar size of the increase in the ENB dividend will continue to grow by larger and larger amounts.  As such, I would guess that ENS will be cash flow neutral in 12 years. In addition, I expect that ENB will be able to increase its payout ratio above 3% once the Dominion assets have been fully absorbed into the ENB system. If ENB starts increasing its dividend by 4% instead of 3%, the math for ENS gets better.  It wasn't long ago that ENB's long term CAGR was 12%.  I don't see that happening again as ENB keeps getting bigger and bigger which means it gets more difficult to move the needle with any new acquisition. 


When ENS is no longer paying out more in dividends that it receives in dividends from ENB, the risk of a depreciating NAV for ENS goes away. At that point, the risk of ENS depleting its NAV disappears while the higher yield will remain. NICE.

Of course, ENB shareholders will continue to receive higher and higher dividends while ENS shareholders will only receive $0.13 per month.  That is a  negative of owning ENS vs ENB.  However, the offset is that ENS will go back to trading at higher premiums which in turn will support Middlefield in doing more and more Raises.  When Middlefield does Raises, it pissses everyone off, so the natural move would be for Middlefield to to raise its dividend for ENS like it did in May 2019.  

Nothing is ever easy but if you dig a little, the plan becomes more obvious

[Experienced]

Obscure...nice analysis The only problem regarding your analysis is that at my age, odds are that I will be looking up at the grass instead of looking down at it by the time ENS become revenue neutral....

[cttglvr]

Hey Obscure. A question for you. With Enbridge going ex div in a couple of weeks what does your crystal ball say about ENS? Usually ENB will go up and then drop 2X the dividend amount. Buy ENB before ex dividend and sell after ex div and buy more ENS? I truly appreciate your expertise!