Is it Finally Time to Buy Enbridge Inc.?

Enbridge Inc. (TSX:ENB)(NYSE:ENB) watched its stock tick lower following its Q4 2017 earnings release. Should you buy it today? Let’s find out.

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Enbridge Inc. (TSX:ENB)(NYSE:ENB), North America’s largest owner and operator of energy infrastructure, released its fiscal 2017 fourth-quarter and full-year earnings results before the market opened on Friday, and its stock responded by falling 0.65% in the day’s trading session. The stock now sits more than 25% below its 52-week high of $57.75 reached back in April 2017, so let’s break down the results and the fundamentals of its stock to determine if now is finally the time to buy.

A year to remember

Here’s a breakdown of five of the most notable statistics from Enbridge’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) $2,963 million $1,762 million 68.2%
Adjusted earnings $1,013 million $522 million 94.1%
Adjusted earnings per common share (EPS) $0.61 $0.56 8.9%
Distributable cash flow $1,741 million $879 million 98.1%
Cash provided by operating activities $1,341 million $1,058 million 26.7%

And here’s a breakdown of five notable statistics from Enbridge’s 12-month period ended December 31, 2017, compared with the same period in 2016:

Metric Fiscal 2017 Fiscal 2016 Change
Adjusted EBITDA $10,317 million $6,902 million 49.5%
Adjusted earnings $2,982 million $2,078 million 43.5%
Adjusted EPS $1.96 $2.28 (14.0%)
Distributable cash flow $5,614 million $3,713 million 51.2%
Cash provided by operating activities $6,584 million $5,211 million 26.3%

Is it time to buy?

The fourth quarter was fantastic overall for Enbridge, and it capped off a transformational year for the company in which it completed its merger with Spectra Energy to create the largest energy infrastructure company in North America; that being said, I think its stock should have responded to the earnings release by moving higher, and I think it’s a strong buy today for two fundamental reasons.

First, it’s undervalued. Enbridge’s stock currently trades at just 21.9 times fiscal 2017’s adjusted EPS of $1.96 and only 18.7 times the consensus EPS estimate of $2.30 for fiscal 2018, both of which are inexpensive given the low-risk nature of its business model, which can be attributed to more than 95% of its cash flows being secured under long-term contracts or similar arrangements; furthermore, the stock trades at a mere 9.7-10.3 times its distributable-cash-flow guidance of $4.15-4.45 per share for fiscal 2018.

Second, it offers a high, safe, and growing dividend. Enbridge currently pays a quarterly dividend of $0.671 per share, equating to $2.684 per share annually, which gives it a juicy 6.25% yield. It’s also important to note that the infrastructure giant’s 10% dividend hike in November has it on track for 2018 to mark the 23rd straight year in which it has raised its annual dividend payment, and that it has a dividend-growth program in place that calls for annual growth of 10% through 2020, all of which makes it one of my favourite dividend stocks in the market today.

With all of the information provided above in mind, I think all Foolish investors should strongly consider making Enbridge a long-term core holding.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned in this article. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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