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shares of enbridge (NYSE:ENB) According to data provided by , it decreased by 7.8% in 2023. S&P Global Market Intelligence. This wasn’t a huge drop, but it was significantly below the overall market. S&P500 On a positive note, Enbridge’s high-yield dividend helped narrow its underperformance on a total return basis (-1.1% compared to the S&P 500’s 26.3% total return).
Several factors weighed heavily on Canadians. pipeline and utility The giant last year most notably agreed to buy three natural gas companies. dominion.
Take advantage of once-in-a-generation opportunities
Enbridge’s pipeline and utilities business model helps insulate the company from market conditions. That was evident last year as well. Despite falling oil and gas prices, Enbridge remained on track to meet his 2023 financial guidance.
While the downturn in the energy market may have put some downward pressure on Enbridge’s stock price, it was not the main factor causing Enbridge’s stock price to decline. After the company announced in September that it would acquire three natural gas companies from Dominion for $14 billion, the stock took a significant pullback. The main reason for this is that Enbridge chose to issue C$4.6 billion ($3.4 billion) in stock to pre-fund the transaction, which would dilute existing investors in the short term. It will become
The company believes the deal was too good to pass up. “Adding a natural gas business of this size and quality at a historically attractive multiple is a once-in-a-generation opportunity,” CEO Greg Ebell said in a press release announcing the deal. ” he commented. You will pay 1.3 times more Corporate value-Rate base and 16.5x price versus revenue. Considering these multiples, this transaction will be accretive to first-year adjusted earnings and distributable cash flow per share.
Meanwhile, the deal will further enhance the company’s growth profile over the next three years, as the company will invest C$1.7 billion ($1.3 billion) annually to expand these businesses. This acquisition also reduces the company’s risk profile by increasing revenues from its highly stable natural gas distribution segment.
This agreement further strengthens Enbridge’s ability to achieve its goal of 5% profit growth over the medium term. It also increases the ability to continue increasing dividends. Enbridge has already announced plans to increase its dividend by 3.1% in 2024, marking the 29th consecutive year of dividend increases.
Is Enbridge a buy after last year’s slump?
Enbridge’s sale in 2023 made its stock price cheaper and its dividend yield rose to its current level of 7.3%. With revenue expected to grow 5% annually over the medium term, Enbridge could generate an average annual total return of 12% going forward.
On the other hand, if the company’s valuation multiple recovers from last year’s decline, it could rise further. The potential for high total returns from such a low-risk stock makes Enbridge a very attractive buy after last year’s downturn, especially for those looking for an attractive, steadily increasing income stream. appear.
Should you invest $1,000 in Enbridge right now?
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Matthew DiLallo has a position at Enbridge. The Motley Fool has a position in and recommends Enbridge. The Motley Fool recommends his Dominion Energy. The Motley Fool has a disclosure policy.
Why Enbridge stock fell almost 8% in 2023 Original article on The Motley Fool
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