Enbridge Inc. (TSX:ENB)(NYSE:ENB) recorded a GAAP net loss of $90 million during last year’s third quarter. As paradoxical as it sounds, however, ENB’s financial results were solid. The net loss was due to unusual and non-recurring items.
Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 14% year over year, while the company’s adjusted net income was up 17%. There are very good reasons to add shares of the Alberta-based energy company to your portfolio. Let’s consider two reasons to invest in ENB.
Growth, growth, growth
ENB currently has various growth projects in place as the demand for natural gas increases. Most notable among these projects are ENB’s NEXUS and TEAL gas pipeline projects. The NEXUS project is a joint venture between ENB and DTE Energy.
The project consists of constructing about 255 miles of natural gas transmission pipelines that run through various Midwestern states in the U.S. and parts of Ontario. This venture meets growing demands in the region, promising to deliver cleaner natural gas to homes and businesses.
The NEXUS pipeline is designed to transport up to 1.5 billion cubic feet per day of natural gas, which is enough to power over six million homes per year. Last October, the relevant U.S. authorities allowed part of the NEXUS pipeline to start delivering service.
The green light granted by authorities will enable ENB to deliver 0.97 billion cubic feet of natural gas per day, which amounts to about 65% of the pipeline’s capacity. Approval for the remainder of the NEXUS pipeline should come soon for the Ontario company.
ENB’s Texas Eastern Appalachian Lease (TEAL) natural gas pipeline project connects natural gas (shale gas) basin in Ohio, Pennsylvania, and West Virginia to other parts of the country and Canada. This pipeline can deliver one billion cubic feet of natural gas per day, which is enough to power five million homes per year.
Part of the TEAL gas pipeline went into service in October of last year. Both the NEXUS and TEAL projects allow ENB to enhance its already strong market position, and the company’s growth prospects look as solid as ever.
Cash-flow and dividends
In its latest earnings report, ENB’s was on pace to achieve its financial guidance for 2018. One of the company’s goal was to achieve an excellent distributable cash flow (DCF) per share between $4.15 and $4.45. ENB’s year to date DCF increased by 48%; the company’s DCF has already surpassed what it was at year-end 2017.
ENB’s growing DCF is a strong incentive for income-investors. The company has a history of paying and raising dividend payouts. ENB’s dividends have increased by 173% since 2011, and the company’s current dividend yield is 6.43%.
The bottom line
ENB’s revenue is stable; the company’s growth projects should affect earnings positively for the foreseeable future. ENB’s continues to grow its DCF and the company provides stable and growing dividend payouts. Those are excellent reasons to consider adding ENB’s stock to your portfolio, if you haven’t already.
