Enbridge Inc (ENB) is expected to grow its free cash flow at 18% per year over the new few years. This should allow the company to boost its already attractive dividend.
Enbridge operates the largest crude oil and liquids pipeline system in the world. It is also a leader in natural gas distribution.
The company is based in Calgary, Alberta, Canada and has a market cap of $20.6 billion. It is a Zacks #2 Rank (Buy) stock.
Earnings Beat Expectations
Enbridge reported second quarter earnings per share of 61 cents, beating the Zacks Consensus Estimate by 9%.
Total revenues increased 22% over the same quarter in 2009. The average total deliveries for liquids pipelines grew by 12%. Natural gas delivery & services revenue grew by 22%.
Income from operations improved 40%. Earnings from the liquids pipelines grew by 37%, while the natural gas delivery & services division increased by 63%.
Optimistic Outlook
After reporting solid quarterly earnings, management gave upbeat guidance for the remainder of 2010. The company now expects full year 2010 earnings in the upper half of its previous range of $2.50 to $2.70 per share.
The Zacks Consensus Estimate is well within this range at $2.63, equating to 20% growth over 2009 EPS. The current estimate for 2011 is 7% higher, at $2.82.
Solid Income
Enbridge recently noted that it expects free cash flow to grow at an annual rate of 18% over the next few years. This strong cash flow growth will allow the company to comfortably pay out and even raise its dividend. Enbridge has increased its dividend at an average annual clip of 10% since 2000. It currently yields 3.2%.
The Chart
Shares of Enbridge have gained 37% in the last twelve months. The stock is trading near its 52-week high.
Reasonable Valuation
Despite a nice run-up in the share price, valuations remain reasonable. Enbridge trades at 20.5x forward earnings, virtually in-line with the industry average. Its price to book value of 2.6 is a premium to the industry average of 1.3.
ENBRIDGE INC (ENB): Free Stock Analysis Report
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