May 4, 2021
fundamentals Analysis
[3 min Read]
Company Summary
Enbridge Inc. ("Enbridge" or "the Company") is a leading energy infrastructure company in North America with about 17,000 employees that are mainly concentrated in Canada and the United States (U.S). The company primarily operates through five (5) segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution & Storage, Renewable Power Generation, and Energy Services and each of these segments contribute 26.2%, 12.3%, 11.5%, 1.5% and 48.5%, respectively to total revenues.
Under its key business - Energy Services, the company transports energy through the most extensive and advanced crude and liquids pipeline system that spreads across 17,127 miles globally. The company transports 3 million barrels of crude every day which accounts for almost 63% of the Canadian crude oil production that are transported to the U.S. Enbridge generates stable fee-based revenues from its diversified network of midstream assets.
The following fundamentals and factors have been evaluated and summarized to make an investment recommendation regarding Enbridge:
Earnings Per Share (EPS) Information
Current Quarter (Q1, 2021) EPS Estimate | 0.55 |
Current Year (2021) EPS Estimate | 2.05 |
EPS growth in 2020 vs Previous Year | -6.52% |
EPS growth in Q4 2020 vs Previous Quarter | 19.44% |
Estimated Long-Term EPS Growth Rate | 6.00% |
Dividend Information
Dividend Yield | 6.73% |
Annual Dividend | $2.61 |
Payout Ratio | 1.35 |
YoY Change in Payout Ratio | 0.27 |
Last Dividend Payout / Amount | 11/02/2021 / $0.65 |
Price to Earning Ratio (P/E ratio)
P/E | 18.96 |
Trailing 12 months | 21.30 |
Financial Summary (in millions of CAD)
TTM | 12/31/2020 | 12/31/2019 | 12/31/2018 | |
Revenue | 37,087 | 37,087 | 50,069 | 46,378 |
Operating Profit | 7,957 | 7,957 | 8,683 | 6,939 |
EBIT | 7,034 | 7,034 | 10,265 | 6,404 |
Total Assets | - | 160,276 | 163,269 | 166,905 |
Total Liabilities | - | 95,913 | 93,862 | 93,470 |
Total Equity | - | 64,363 | 69,407 | 73,435 |
End Cash Position | 490 | 490 | 676 | 637 |
Key Financial Ratios as at 2020 FY
Gross Margin | 36.75% |
Operating Margin | 19.38% |
Net Margin | 8.65% |
Return on Assets | 2.08 |
Return on Equity | 5.28 |
Return of Total Capital | 5.64 |
Return on Invested Capital | 2.68 |
Interest Coverage | 2.73 |
Total Debt to Equity | 110.25 |
Source: 2020 Enbridge Financials/ Utradea Analyst Estimates
Comments and Recommendation
Despite the fact that oil prices declined by a significant margin in 2020, Enbridge managed to generate a steady stream of cash flows regardless of the prevailing macroeconomic uncertainty - thus showcasing the resiliency of its business model and making it a top buy (especially for value and contrarian investors). The company's stock has an attractive forward yield of over 6%. It has increased dividend payouts for 26 consecutive years including a 10% hike in 2020 and a 3% hike in 2021. Tracking the enbridge stock in line with input from other analysts reveals a 12-month average target price of $52 which is 11% above the current trading price as at the time of writng this report. After accounting for its attractive dividend yield, annual returns will be closer to 17%.
Through 2023, the Company's management estimates that the Enbridge stock will grow its distributable cash flow per share by 5-7% per year. This should lead to healthy dividend increases of approximately 3-5% in the period. Therefore, ignoring any potential valuation expansion, Enbridge can deliver annualized returns of 10-12% through 2023 and these returns will primarily come from its compelling dividend yield of 7%.