Friday, 7 June 2013

A Look at Enbridge


Recently, certain pipeline and telecom stocks have come down about 10%.  Unfortunately, that does not mean they are deals to be had. Let’s have a look at Enbridge, a stock I bought back in 2009, which has dropped 10.8% over the past 2.5 weeks.

Average Dividend Yield Analysis*

ENB
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2001
$11.39
$8.48
$0.175
$0.175
$0.175
$0.175
$0.35
4.13%
3.07%
2002
$12.32
$10.28
$0.190
$0.190
$0.190
$0.190
$0.38
3.70%
3.09%
2003
$13.54
$10.24
$0.208
$0.208
$0.208
$0.208
$0.416
4.06%
3.07%
2004
$15.04
$11.82
$0.229
$0.229
$0.229
$0.229
$0.4575
3.87%
3.04%
2005
$19.41
$14.30
$0.260
$0.260
$0.260
$0.260
$0.52
3.64%
2.68%
2006
$20.73
$15.88
$0.288
$0.288
$0.288
$0.288
$0.576
3.63%
2.78%
2007
$20.74
$16.81
$0.308
$0.308
$0.308
$0.308
$0.616
3.66%
2.97%
2008
$23.14
$16.55
$0.330
$0.330
$0.330
$0.330
$0.66
3.99%
2.85%
2009
$24.46
$17.60
$0.370
$0.370
$0.370
$0.370
$0.74
4.20%
3.03%
2010
$29.13
$23.02
$0.425
$0.425
$0.425
$0.425
$0.85
3.69%
2.92%
2011
$38.17
$27.05
$0.245
$0.245
$0.245
$0.245
$0.98
3.62%
2.57%
2012
$43.05
$35.39
$0.2825
$0.2825
$0.2825
$0.2825
$1.13
3.19%
2.62%
2013


$0.315
$0.315
$0.315
$0.315
$1.26


Stock prices are per calendar year.
12y ave
3.78%
2.89%
Dividends are recorded in the quarter they were paid.
5y ave
3.74%
2.80%







3y ave
3.50%
2.70%







5y
$33.69
$45.04







3y
$35.97
$46.61






Super Cheap
$29.97



The table shows the 3 year average dividend yield to be 3.50% ((3.69% + 3.62% + 3.19%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.26, one would have to pay $35.97 for a 3.5% dividend yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 4.20%. Using the current annual dividend, that corresponds to a stock price of $29.97 today (see “super cheap” price in the table above).

Graham Price

ENB’s 2010, 2011 and 2012 EPS were $1.33, $1.48 and $1.62. 3Y Ave EPS = $1.48.
ENB’s BV is $8.43.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $16.74

Cyclically Adjusted Price to Earnings Ratio

ENB’s 10Y Ave EPS = $1.06
CAPE = Stock Price / 10Y Ave EPS = $43.84 / $1.02 = 41.4
A CAPE below 20 is good.

Conclusion

Enbridge is still expensive!


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.

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