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Enbridge's Excellent Dividend Growth Potential (Even Without Line 3)

Published Fri, 08 Nov 2019 18:05:12 -0500 on Seeking Alpha

Enbridge's (ENB) Q3 EPS report shows the company is (finally...) starting to exhibit the strong underlying potential of the Spectra Energy acquisition that closed more than two-and-a-half years ago (February 2017). How time flies. Much has happened since the acquisition closed: Enbridge rolled-up all its MLPs, sold billions in non-core assets, and digested Spectra's natural gas pipeline assets into the organization.
Financial returns in Q3 were strong and were highlighted by a significant up-tick in distributable cash flow ("DCF") as compared to previous quarters:
Source: Q3 Presentation
Note that DCF in Q3 was up 33% yoy as compared to DCF growth of 24% and 20% in Q2 and Q1, respectively. As a result, the company said it now expects to exceed the midpoint of its FY2019 DCF guidance of $4.30-$4.60/share.
However - before investors get too excited - I need to remind them that due to the roll-ups, the total outstanding share count is now 2.018 billion versus 1.705 billion in Q3 of last year.
Dividend Potential
Let's assume that ENB comes in right at the midpoint of its guidance, or C$4.45/share. Currently, the C$0.738 quarterly dividend equates to an annual obligation of C$2.952.
(all amounts in Canadian dollars)
Quarterly Dividend
(starting point)
10% Increase In
Quarterly Dividend
Yield Based On Current Price (C$49.62) Q4 2019 $0.738 N/A $2.952 5.95% 2020 $0.812 $3.248 6.55% 2021 $0.893 $3.573 7.20% 2022 $0.982... Read more