Q: I would appreciate your take on - The cracks in the Enbridge dividend story by David Milstead in the G&M dated Dec 3, 2017. Some of the key points in the article include (all CAPS from the article):
- ENBRIDGE EMPHASIZES 'AVAILABLE CASH FLOW FROM OPERATIONS' TO INVESTORS WHEN IT TALKS ABOUT THE SUSTAINABILITY OF ITS DIVIDEND. IN CALCULATING THIS MEASURE, IT IGNORES MOST OF ITS CAPITAL EXPENDITURES, DEDUCTING ONLY 'MAINTENANCE' CAPEX TO ARRIVE AT THE NUMBER. THAT HAS LEFT BILLIONS OF DOLLARS OF CAPEX OUT OF THE MEASURE OVER TIME. WHEN ALL OF THE COMPANY'S CAPITAL EXPENDITURES ARE DEDUCTED FROM OPERATING CASH FLOW, ENBRIDGE POSTS NEGATIVE FREE CASH FLOW IN NEARLY EVERY YEAR. STILL, THE COMPANY PAYS DIVIDENDS — AND ISSUES DEBT, AS WELL.
- For the third quarter, Enbridge reported $360-million in maintenance capital expenditures. Total capex was $1.95-billion. Depreciation, a measure of how much of the company's property, plant and equipment was "used up" in the period, was $848-million.
- In the last 10 years, from 2007 on, it was only in 2016 that Enbridge actually posted positive free cash flow, a paltry $83-million. The 10-year total is a staggering $24.1-billion in negative free cash flow. That's before paying out $7.4-billion in dividends. Perhaps not coincidentally, the company issued almost $25.6-billion in net debt over that decade. It now has $65-billion in debt on its books, including the tens of billions it took on in the merger with Spectra Energy Corp. this year.
- https://www.theglobeandmail.com/globe-investor/inside-the-market/the-cracks-in-the-enbridge-dividend-story/article37172663/
I would have expected that maintenance capex would be inline with the depreciation expense. Is Milstead highlighting one of the risks in ENB - ie., that the dividend is solid as long as the market has confidence in the Company and it can raise additional capital each year.
What mid/large-cap companies in this sector would you would recommend that have more conservative financials?
Thank you.
- ENBRIDGE EMPHASIZES 'AVAILABLE CASH FLOW FROM OPERATIONS' TO INVESTORS WHEN IT TALKS ABOUT THE SUSTAINABILITY OF ITS DIVIDEND. IN CALCULATING THIS MEASURE, IT IGNORES MOST OF ITS CAPITAL EXPENDITURES, DEDUCTING ONLY 'MAINTENANCE' CAPEX TO ARRIVE AT THE NUMBER. THAT HAS LEFT BILLIONS OF DOLLARS OF CAPEX OUT OF THE MEASURE OVER TIME. WHEN ALL OF THE COMPANY'S CAPITAL EXPENDITURES ARE DEDUCTED FROM OPERATING CASH FLOW, ENBRIDGE POSTS NEGATIVE FREE CASH FLOW IN NEARLY EVERY YEAR. STILL, THE COMPANY PAYS DIVIDENDS — AND ISSUES DEBT, AS WELL.
- For the third quarter, Enbridge reported $360-million in maintenance capital expenditures. Total capex was $1.95-billion. Depreciation, a measure of how much of the company's property, plant and equipment was "used up" in the period, was $848-million.
- In the last 10 years, from 2007 on, it was only in 2016 that Enbridge actually posted positive free cash flow, a paltry $83-million. The 10-year total is a staggering $24.1-billion in negative free cash flow. That's before paying out $7.4-billion in dividends. Perhaps not coincidentally, the company issued almost $25.6-billion in net debt over that decade. It now has $65-billion in debt on its books, including the tens of billions it took on in the merger with Spectra Energy Corp. this year.
- https://www.theglobeandmail.com/globe-investor/inside-the-market/the-cracks-in-the-enbridge-dividend-story/article37172663/
I would have expected that maintenance capex would be inline with the depreciation expense. Is Milstead highlighting one of the risks in ENB - ie., that the dividend is solid as long as the market has confidence in the Company and it can raise additional capital each year.
What mid/large-cap companies in this sector would you would recommend that have more conservative financials?
Thank you.
