Enbridge (TSX: ENB, Stock Forum) made some major steps toward increasing shareholder value when the company announced today that it was increasing its next quarterly dividend by 33% as well as a Canadian restructuring plan.
According to the news release, the company's quarterly common share dividend will increase 33% to $0.465 per share with the next dividend payable March 1, 2015.
Enbridge's board of directors have approved a revised dividend payout policy range of 75% to 85% of adjusted earnings compared to the previous payout policy range of 60% to 70%. The resulting annual dividend growth rate is expected to average between 14% and 16% from 2015 to 2018.
The company also confirmed plans to transfer its Canadian Liquids Pipelines business, made up of Enbridge Pipelines and Enbridge Pipelines (Athabasca), and including certain renewable energy assets, to its Canadian affiliate, Enbridge Income Fund (TSX: ENF, Stock Forum)(“EIFH”). The transfer and initial investment by EIFH are slated for completion mid-2015.
However, there can be no assurances that the planned restructuring will be completed in the manner contemplated, or at all, or that the current market conditions and the company's future forecast will not materially change.
There is also a potential parallel U.S. restructuring plan under review whereby the company would transfer its directly held U.S. Liquids Pipelines assets to its U.S. affiliate, Enbridge Energy Partners, LP. This review has not yet reached conclusion.
Company President and CEO, Al Monaco, commented, “The 33% increase in our dividend that we announced today and 14% to 16% expected annual average dividend growth rate through 2018 reflects Management's confidence in the strength and embedded cash flow growth from the existing assets and the capital projects that will be put into service over the next four years.”
He went on to explain, “The change in our dividend policy range to 75 - 85% of adjusted earnings is supported by the excellent progress we've made on our enterprise-wide funding program, raising some $16 billion in debt and equity capital over the last two years; the expected increase in free cash flow through 2018; and reliable access to effective sources of equity funding including from our sponsored vehicles.”
Then he added, “Our plan to transfer the Canadian Liquids Pipelines business to Enbridge Income Fund comes after an extensive review of the potential to further enhance the value of our $44 billion growth program and lower the cost of funding for that program and for new investment opportunities. We believe that the drop down of our Canadian Liquids Pipelines business into the Fund will transform it into a high growth vehicle and be beneficial for shareholders of both Enbridge and Enbridge Income Fund Holdings, while continuing to assure the funding of our organic growth program.”
And finally concluded, “Although we are focused on optimizing our cost of capital for the benefit of our customers and investors, our first and most important priority will continue to be ensuring the safety and operational reliability of our systems. Enbridge will continue to manage the operations and strategic development of the liquids pipelines business as it does today to ensure cost effective market access for producers and reliable supply sources for refiners.”
Enbridge was in the news recently when the Calgary-based company announced five days ago that it was snapping up majority interest in a $650 million wind farm portfolio.
Shares climbed 10.34% on the news to $60.06 per share.
Currently there are 848.8m outstanding shares with a market cap of $51.0 billion.