Saturday, December 6, 2014

Recent Dividend Increase

On Dec 1, Enbridge paid out its last dividend under the old annual rate on December 1. On Dec 3rd, Enbridge announced that the annual dividend will be increased by 33% with the first quarterly payment on March 1, 2015. Enbridge has now raised their dividend 20 consecutive years which includes during the recent recession.

Enbridge's Dividend Rate from 2003- 2015


 Formula for CAGR = (Ending Value / Beginning Value) ^(1/N) -1 where N is the number of periods.

       The dividend rate was $0.415 per share in 2003 and, with the recent increase to $0.1862 for 2015 which represents a CAGR of 13.33% over the past 12 years. In 2005, the dividend rate was $0.52 per share which represents  a CAGR of 13.61% over the past 10 years. In 2010, the dividend rate was $0.8500 which represents a CAGR of 16.98% over the past 5 years.

Why the Increase?

     Enbridge has embarked on a 17 billion dollar restructuring plan. They plan on "Drop Down"  its Canadian Oil Pipeline business that included its mainland pipeline system and the oil sands network. These assets will  go into Enbridge Income Fund when all is said and done.  Initially, this will go into a private company that Enbridge controls, in which Enbridge Income Fund will buys these assets from the private company.  Enbridge then receives the money from the private company which they control.  By doing this, Enbridge will lower costs and will not have to issue new shares or as many new shares to fund future projects. Enbridge might do the same thing with their US assets and Enbridge Energy Partners.
       Enbridge plans to grow its dividend in 2016 to 2018 by an average of 15% per year.

This 33 % increase will increase by annual dividend income by $18.49.  I will take the 33% as an early Christmas gift.

Disclosure: Long ENB

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

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