The price of barrel of crude oil has gathered strength in the recent weeks. Energy producers will struggle for the foreseeable future as the price will come nowhere near the $90 dollar per barrel anytime soon. The other alternative in this space is the transportation of energy from point A to point B. The companies in the transportation of oil and gas are the pipeline companies.
One such company that has been negatively affected in the past year is Enbridge Inc. (ENB). Enbridge transports oil and gas by pipelines and electricity via windmills and solar. During the last year, Enbridge completed the acquisition of Spectra Energy in the United States. This transaction has made ENB the largest Energy transporter in North America.
Why does an energy transporter better than an oil and gas producer? ENB is not as effected by the price of oil or natural gas as much as an energy producer like Enerplus (ERF). One way of ENB making money is heating homes. When a furnace kicks in during the cold months of the year, ENB makes money.
ENB has increased their dividends for years on end. ENB has not received positive attention from analysts on the BNN, a Canadian-based business news channel and website. They are concerned about the low earnings compared to the annual dividend paid out. Usually ENB raised their dividend shortly after the dividend payment date on Dec 1. However, last year ENB raised their dividend twice in January 2017 and May 2017. ENB waited to Jan 2017 to increase their dividend instead of announcing in December. The reason for this is that they wanted to see if the Spectra Energy acquisition was going to be allowed. So January 2017 was a 10% increase and in May the increase was after the deal was finalized. On aggregate, the dividend was increased 15% in 2017.
Conclusion
ENB currently is trading near 52 week lows. I do believe the company will have better earnings going forward. Warren Buffett once said, "We tend to be greedy when others are fearful, and fearful when others are greedy". As I believe this is a good company, I purchased 300 shares of ENB on the Toronto Stock Exchange at $44.10 per share for a total cost of $13234.95 including commissions. At the time of this writing, the stock is currently yielding 5.4%, which is trading above the broader market (S&;P TSX Index) and its own 5-year average of 3.1%.
The current dividend rate of ENB is $2.44 per share per year. This purchase adds $732 per year to my annual dividend income.
Please Note: ENB and ERF trade on both the NYSE and Toronto Stock Exchange.
Disclosure: Long ENB, ERF
DISCLAIMER
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.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
