Tuesday, September 22, 2015

Recent Buy: Enbridge Income Fund Holdings

There are three Canadian dividend growth stocks that I find tempting to buy any time their price unexpectedly decreases: Telus, Alaris Royalty, and Enbridge Income Fund Holdings. The reason is that all three companies have management whose primary objective is to grow their dividends over time. Not only have all three sets of management talked the talked, they've also walked the walk. 

Last week, when Enbridge Income shares were down 4% for no apparent reason, I decided to scoop some up in my RRSP. I was able to buy my shares of Enbridge Income with a dividend yield of 5.3% (dividends paid monthly) and at a very reasonable P/E of 18.5X (vs their 2015 YTD average P/E of 22.7X). Since an Enbridge subsidiary, Gazifere provides the natural gas that heats my house in the winter, this buy also provides me with a "life hedge"; where my increasing stream of dividends from the company help pay my monthly gas bill.

Speaking of increasing streams of dividends, at the start of September, Enbridge Income Fund's management raised their dividend by 10% after completing a $30B acquisition of assets from Enbridge Inc. Management indicated it plans to raise the dividend another 10% in January 2016 and each year their after through 2019. If it this sounds familiar, it's very similar to the intentions of Richard Kinder at Kinder Morgan (albeit his planned increases run through 2020).

I'll admit that this might be a short term trade. The shares have already recovered a couple percentage points from when I bought them, and I might be tempted to sell and reinvest in a long-term holding  (i.e. the companies on my September watch list at their target prices). Either way, I'll keep you posted.

Are there companies that you would consider adding to your positions even if they represent a disproportionately large share of your portfolio?


2 comments:

  1. Nice purchase, DiH. Ive had my eye on ENB and ENF for a while now and would love to own either of those companies. But I am pretty heavy on energy companies right now, so holding off on going crazy in that space.

    Great starting yield to buy into ENF.

    Best wishes
    R2R

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    1. Thanks R2R. I think now is the time to be heavy on energy companies, but agree that there's no need to go crazy. Enjoy your weekend!

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