[Jungle]

Another solid dividend increase today, 15% starting in March. Stock up 2.52% on this. They are forecasting annual 10% earnings growth for at least the next three years.

We finally bought during the August dip. I always watched others buy this company over the last few years, so congratulations to those who held over the years.. the returns are fantastic!


The P/E of 27 might not look too bad, when they are stable and growing. Would you buy more at this price? Do you think this will really drop down, to catch another dip?

 

[P_I]

I would think that a P/E of 27 would be more likely given to fast growing company, like a tech company. For a company growing EPS at 10%/year that is a lofty valuation IMHO. Last time I ran the numbers (back in Feb. 2010), over the past 10 years, the average high P/E was 20.1.

What happens to the price if valuations contract to those levels? Is Enbridge benefiting from those who are reaching for yield? Dividend stocks are very popular these days, I'd question if you want to move with or against the herd.

My $0.02

 

[doctrine]

I bought back in March. I was going to buy more in Aug/Sep, but that transaction went to Fortis instead. Which is up 10% itself, but not as much as ENB. I would definitely consider adding more but I'd like to see it at a 3.5% dividend yield. Even with the increase, it's still only 3.15%.

It really is highly priced; a P/E of 27 with 10% earnings growth means you're looking at over 10 years of zero capital gains just to get to a P/E of 10.

Therefore, would predict little capital gains upside, but probably no real downside risk as well. Probably why its doing so well.

 

[scomac]

It really is highly priced; a P/E of 27 with 10% earnings growth means you're looking at over 10 years of zero capital gains just to get to a P/E of 10.

Therefore, would predict little capital gains upside, but probably no real downside risk as well. Probably why its doing so well.

So what you're really saying is that it's OK to take on equity risk for a 3% return while folks are certain that a similar return from long bonds is certain to be a terrible alternative.

 

[warp]

I have been looking at Enbridge for quite a long time, and could never bring myself to buy it because it just always seemed too expensive, ( and the div yield seemed low too).

That being said.....it just keeps going up and up and up, and has had a great run, so it bothers me that I never bought it.

I have tried to come to a logical reason why this is, amd why money keeps flowing into the stock, and if there is something I am missing with Enbridge, but I can't come up with a reasonable explanation. I just assume that people just WANT to own it! This includes mutual funds, money managers and institutional holders.

I still say that at a p/e of 27 it indeed is still too expensive for me, even with a 10% growth rate. Of course it will probably be up 15% + by this time next year , and I will again be mad at myself !

I will say that the company had better execute, because if they do miss, I think there will be a lot of profit taking and selling, and the price might get back to their normal p/e range.......

If only I had a crystal ball!

 

[Assetologist]

Warp, the only aspect of investment that a small investor can control is what and when to buy - I would wait until ENB goes on sale.

 

[Cal]

http://www.theglobeandmail.com/glob...ividend-a-pipeline-to-profits/article2270029/

 

[warp]

Warp, the only aspect of investment that a small investor can control is what and when to buy - I would wait until ENB goes on sale.

Well, therein lies the problem:

Everyone seems to agree that if not overpriced, Enbribge is at least pretty pricey.
Yet it never seems to come down! I'd love for ENB to "go on sale" as you put it: just hasnt happened lately.

I have come close to holding my nose and just buying ENB at market, but that's hardly an investment plan.

That being said, I own just about every other pipeline stock in Canada, and have done very well with them, both with income and gains, so perhaps I should just be happy with that.

Thanks for your thoughts though, and thanks to CAL for that interesting Globe link.....I was having coffee with a friend yesterday, and he mentioned that exact article about Enbridge, but I hadn't seen it myself.

 

[Jungle]

yea 350% + return over 10 years is... amazing!
The only way to get in now is when we have these flash sell offs, when markets dip 500 points on one day. This is how I got ENB in August. Like others I just can't buy at these prices.

 

[HaroldCrump]

One of the reasons for the perceived strength of pipelines and utilities is the yield play.
With interest rates so low, many investors see pipelines and utilities like these as the safe havens with yield to boot.
Which is why these guys have held their ground through all the carnage this year.
It'd be interesting to watch their valuation in higher interest rate environment.

But, being invested in this space myself (not ENB though), I'm not complaining.

 

[doctrine]

ENB only rose above $30 consistently as of March 2011. It traded below $29 in August. It will get cheaper at some point.. probably when other stocks start doing well, as ENB is not likely to follow a wider market increase. If share price disappoints, it could quickly hit $26-28 and I will be a buyer again. If not, I'm happy with my gains so far.

 

[warp]

One of the reasons for the perceived strength of pipelines and utilities is the yield play.
With interest rates so low, many investors see pipelines and utilities like these as the safe havens with yield to boot.
Which is why these guys have held their ground through all the carnage this year.
It'd be interesting to watch their valuation in higher interest rate environment.

But, being invested in this space myself (not ENB though), I'm not complaining.

There is no doubt that "pipelines and utilities" have done well partly because of this low interest rate environment.

It doesn't hurt that they are good income stocks, and pretty good sleep-well-at-night stocks to boot.

I have been waiting for interest rates to rise for several years, and it hasn't happened. Govts... esp the US govt have been keeping interest rates artificially low through their intervention for political reasons, and Canada has followed.

By doing so they have hurt income oriented fixed income investors, and esp seniors looking for a safe return. They are also pushing normally conservative leaning investors further and further along the risk curve.

Logic, ( and past history ), dictates that inflation must follow this course of action sooner or later.

I also have some concern about what will happen to these stocks when interest rates do finally rise..........but I'm not selling my shares.
Are you??

 

[dubmac]

sold 1/2 my position in TRP & looking to buy ENB when it's cheaper - I agree that (in a yr or so) int rates will rise, and some of these pipeline/utility stocks will likely drop. The big question is ...when? Til then, I'm looking at ZRE and ZUB.

 

[HaroldCrump]

I have been waiting for interest rates to rise for several years, and it hasn't happened. Govts... esp the US govt have been keeping interest rates artificially low through their intervention for political reasons, and Canada has followed.

By doing so they have hurt income oriented fixed income investors, and esp seniors looking for a safe return. They are also pushing normally conservative leaning investors further and further along the risk curve.

Agreed, artificially low interest rates are creating many imbalances in the system, this is just one of many.

Logic, ( and past history ), dictates that inflation must follow this course of action sooner or later.

Inflation is already here, just look around you.
It is not the fear of inflation that stops the govt. from raising rates - it's the fear of deflation, esp. in a key industry (RE).

I also have some concern about what will happen to these stocks when interest rates do finally rise..........but I'm not selling my shares.
Are you??

Nope, not yet.
Low interest rates are not the only thing helping stocks like these.
Also, low interest rates are benefitting REITs.
I haven't sold any of my holdings in that space either.

 

[cdnpennystocks]

I've been waiting for MONTHS for a correction in this one but it just keeps going up. I invested 10% of what I wanted, but still have 90% to put in. Hopefully there is a bit of a dip soon.

 

[zylon]

"An open letter from the Honourable Joe Oliver, Minister of Natural Resources, on Canada’s commitment to diversify our energy markets and the need to further streamline the regulatory process in order to advance Canada’s national economic interest."

http://opinion.financialpost.com/2012/01/09/open-letter-radicals-threaten-resource-development/

 

[Ethan]

"An open letter from the Honourable Joe Oliver, Minister of Natural Resources, on Canada’s commitment to diversify our energy markets and the need to further streamline the regulatory process in order to advance Canada’s national economic interest."

http://opinion.financialpost.com/2012/01/09/open-letter-radicals-threaten-resource-development/

I hadn't heard of Joe Oliver before yesterday, but I like the man already.

I bought into Enbridge last October. I am still bullish on ENB long-term so I am hanging onto my shares, but it has become really expensive. A PE ratio of 28 for a pipeline is very high. It seems that with bond yields near 0, yield hungry investors turned to the safety of pipelines.

 

[doctrine]

Here's to hoping that negative publicity in these hearings will drive ENB's stock down 10% perhaps Would really like to see it at $30 but would probably add to my position at less than $33

 

[Toronto.gal]

I hadn't heard of Joe Oliver before yesterday, but I like the man already.

I like him too; he represents my electoral district.

A quiz, lol.

http://www.theglobeandmail.com/repo...er-how-many-died-building-cpr/article2297410/

 

[somecanuck]

Any news on Enbridge? My wife bought us some shares at $24.69. It's shocking to open my assets spreadsheet and see it up by 53.88% since then.