Q: I’ve been looking at Enbridge debt for the past 10 years. It is up quite significantly. With the rise of interest rates, their interest payments are increasing every quarter. They will now be adding more to their debt with the recent acquisition. Is this the next AQN? Is the dividend safe?
Tks Kevin
Tks Kevin
5i Research Answer:
ENB debt has gone from $42B to $79B since 2015. But at the same time, assets have gone from $57B to $180B, so assets have gone up at a faster rate. Cash flow has gone from $2.5B to $13B. We can't deny that higher rates are going to hurt margins. But the payout ratio is below 60%, and ENB has been far more successful with its acquisitions than AQN and some others. It is also nearly 20X as large as AQN and has significant assets it could sell if it needed. We would not consider the dividend to be at risk, though the stock may not do too much until there is a clearer picture on interest rates.