2021 Week 15: Enbridge (NYSE: ENB)

Portfolio Update

The FiveTwenty portfolio received no dividends in the past week.

Past Week Dividend$0
Current Quarter Dividend (Q2 2021)$0
LifeTime Dividend$113.04
Estimated Annual Dividend$1105.64
Dividend Scorecard

The capital allocation for the week of 04/11/2021 to 04/17/2021 will be used to add to our position in Enbridge (NYSE: ENB)

ENB – Update

Since our last check-in on ENB in week 6 of 2021, the company reported Q4 and full year 2020 earnings on 02/12/2021. Additionally, the share price has grown 3.25% from C$44.91 to C$46.22 during the period.

TTMPrev. Update10-year median
Dividend Streak26 years26 years
Yield7.06%7.21%3.41%
Payout Ratio (DCF)69.91%*70.43%**NA
P/DCF9.89*9.76**NA
Entry Criteria Scorecard

* computed using TTM DCF of C$4.67 as of Q4 2020
** computed using TTM DCF of C$4.60 as of Q3 2020

Q4 and FY 2020 earning report

Did ENB’s latest earnings report raise any warning flags?

For FY 2020, EMB grew both cash provided by operating activities (OCF) and distributable cash flow (DCF) compared to 2019. OCF increased to C$9.8 billion from C$9.4 billion. DCF increased to C$9.4 billion from C$9.2 billion. Furthermore, DCF per share were C$4.67, a value above the mid-point of the full-year guidance. The numbers reflect a strong Q4 which benefited from an improving economic environment.

OCF
(in millions)
DCF
(in millions)
DCF/share
.
2019C$9 398C$9 224C$4.57
2020C$9 781C$9 440C$4.67

Another major development was that construction on the last segment of the Line 3 replacement started in December 2020. ENB expects the project to be completed for a Q4 2021 in-service date. With the completion of the Line 3 replacement project, ENB will free up C$5-6 billion of annual investment capacity that it will be able to deploy into further growth projects or share buybacks.

Looking ahead, the company estimates that during 2021 it will be able to place into service projects totaling C$10 billion of its growth capital investments. Accordingly the DCF/share guidance for FY 2021 is C$4.70 to $5.00. This would represent a 0.6% to 7% increase from 2020.

Thesis

Why are we adding to the FiveTwenty portfolio’s position in ENB?

With a solid FY 2020 despite a challenging energy and economic environment, ENB has once again demonstrated the durability of its business model. Furthermore, the company reiterated its guidance of grow DCF per share 5-7% through 2023. It also reiterated its commitment to continue paying and growing its dividend in line with DCF per share growth.

Finally, improving economic conditions will have a positive impact on ENB near term prospects. In addition, the ~7% yield makes another strong argument for adding to out position in ENB.

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