Any more bad news? I don't own Enbridge, but do have some Emera.
Enbridge (ENB.TO)
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I doubt the Indians think getting covid is "frivolous" !
So the construction crews won't ever venture out of the pipeline right of way?
I can see their point - Moving those crews in will put locals at risk of contracting Covid. By protesting they may at least ensure that the contractors take proper precautions to avoid contact between their crews and the locals. It's much like the migrant farm workers and we know what happened there.
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In progress Kitimat LNG project facing same issue.
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If First Nations don't want to risk Covid-19, then all they have to do is stay away from any construction crews and their work camps, wherever they are at. This is nothing more than the pot calling the kettle black. Then they will ***** about not having any of the economic spinoffs, e.g. local services, during construction.
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Agreed. Company and investors would have been much better served by debt repayment.
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Or maybe they could have offered a token dividend increase to keep their record alive. Something like a half percent and then put the rest to debt while telling everyone that's what their intent was for the move.
I think everyone would have respected that.
ltr
I think everyone would have respected that.
ltr
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Today's Investor Presentation in all its gory detail. You will find various financial metrics in there. Debt repayment isn't a high priority (almost an after-thought). About the only thing they say is they 'intend' to maintain Debt/EBITDA in the 4.5-5.0 range (currently about 4.7),
They are obviously being fairly aggressive based on the cheap cost of debt vs CAGR of ~13 or so on shareholder equity. That works as long as debt is very cheap. My personal belief is any ratio higher than 4 on capital intensive companies is too high and it would be better to be in the 3.5 times range.
They are obviously being fairly aggressive based on the cheap cost of debt vs CAGR of ~13 or so on shareholder equity. That works as long as debt is very cheap. My personal belief is any ratio higher than 4 on capital intensive companies is too high and it would be better to be in the 3.5 times range.
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In the last year they borrowed $3 billion (new debt) and paid out $7 billion in dividends. They are funding their dividend with debt.
Source: the Q3 financials. In the cashflow statement you can see the dividends paid out, and on the balance sheet you can see the $3.3 billion increase in long term debt.
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Take a look at page 24 and 25 of the investor presentation to see how they distribute cash flow.
The equity portion of capital needs is self-funded, The rest is added debt while keeping D/EBITDA constant. I would have liked no dividend increase which would have resulted in a declining D/EBITDA ratio.
The equity portion of capital needs is self-funded, The rest is added debt while keeping D/EBITDA constant. I would have liked no dividend increase which would have resulted in a declining D/EBITDA ratio.
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I have some,and feel it should be trading in the mid 50$ but it has been in the high 30$ to low 40 for many months. Good div.Has anyone any thoughts.
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ENB is significant part of my investment portfolio. I like the management and their business plan. I disagree with comments about reducing dividend increases.
Hi James, that's not the correct way of looking at the cash flow, in my opinion.
Enbridge and most midstream companies will increase shareholder returns by maintaining a higher debt equity ratio. The highly contracted nature of the cash flows allows the company to increase leverage, improving ROE.
As ENB grows and more projects come online, it makes sense for debt to increase to maintain the ideal amount of leverage in the financial structure.
The more contracted/predictable the cashflows, the higher the leverage can be. A REIT will be able to leverage up more than a pipeline company and an O&G producer will be able to achieve significantly less leverage than a pipeline company for example.
I think this then flows through to the returns. Generally you will pay a higher multiple the more guaranteed the cash flows are, which reduces the overall return. This is offset by the increase in leverage, which increased ROE.
I am not an expert, but this is how I think of it:
Pipeline --> highly contracted / predictable CF --> Pay a high multiple for the CF (reduced returns) --> High leverage increases returns
Producer --> Commodity exposed / risky CF --> Pay a low multiple for CF (increases returns) --> Low leverage decreases returns
Just my views on it, again I am not an expert.
This is kind of true but kind of misleading too. They typically borrow for their growth projects and pay out their high dividend from their existing projects, which is normally how they present the financial summaries. This works until they run into challenges with growth projects or existing projects that impact cash flow.
Also relevant is ENB has something like $8 billion invested in Line 3 for which they derive nearly zero revenue at this time but has been largely paid for. Once that comes online, there will be a big boost to revenue and cash flow and the leverage ratio will drop. With big pipes like ENB and TRP running out of large growth projects, both companies could choose to pay down this debt or perhaps look to acquisitions.
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