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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hi Peter. To my dismay, I currently hold too many pipelines... Enbridge, Pembina, & Inter Pipeline. I wish to cut 2 of the positions and then possibly pickup Algonquin Power. I also own Fortis & Emera. Which pipeline would you suggest keeping, and your reasoning behind it. Also, do you feel 3 power utilities would then be too many and if so, which 2 would you prefer? I welcome your input. Thanks.
Read Answer Asked by Ron on April 16, 2018
Q: Hello,

If there is never another new pipeline built in Canada (which I feel is a real possibility), how would you view pipelines companies as long term investments going forward?

Regards,

Robert
Read Answer Asked by Robert on February 23, 2018
Q: Hi 5i Team,
I own positions in IPL, ENF, KEY, ALA, and PPL. I am a long-term income investor who (like many) is a bit disappointed with the relative (to the market) decline in the share prices of these companies. All of them have been good at growing their businesses, earnings, and cash flows, and dividends - cornerstones of my investment strategy. On a fundamental basis, I don't see anything wrong with any of them, and am inclined to stay the course, thinking the market will eventually reward these companies. I recognize that many of these companies carry significant debt (at low, long-term rates I would think, and not variable rates), and the current Canadian regulatory environment is a negative for the industry.
Can you poke any holes in my investment strategy with respect to these names?
Read Answer Asked by Brian on February 09, 2018
Q: The question is in relation to a Cash Acct. which collectively yields sufficient dividends to support all necessary expenses on a yearly basis. The makeup includes the following:
AQN, DRG.UN, LNR, WSP, PKI, EIF, RBC Dividend Fund(all Cdn.. Bks), RBC as well as KEY & PPL which have been held for over 8 yrs. A large capital gain will result if either is sold but will be mostly offset by old losses. My question is which of the two do you recommend selling & suggestions for at least 2 GROWTH dividend yielding replacements. Thank you.
Read Answer Asked by Robert on January 18, 2018
Q: Hi,
Thanks for your service. The info is very helpful. I had Veresen shares that were switched to PPL. These shares are held in a stock transfer company to take advantage of dripping. Veresen stopped dripping prior to the sale and it seems that PPL does not. My question is, did they before this purchase? Whether they did or not, do you know if they have any intention of starting. Thanks
Read Answer Asked by michele on January 09, 2018
Q: Hi,
Unfortunately I bought some of these energy stocks back in 2014 and I am down +30% on all of these. I have just over a 5% weight currently in energy (not including ALA, ENB and TRP which I've included as part of utilities). Which do you think I should continue to hold and which ones should I just throw in the towel and sell?? I am a long term growth investor.
Read Answer Asked by Keith on December 14, 2017
Q: Hi Team,
I have held a full position on both ENB and PPL for 4 years. Share price of ENB has been steadily dropping over the 1 - 2 years while PPL had held its own. I am therefore thinking of moving my money from ENB to PPL (I am therefore may be overweighed on PPL). Your thoughts and comments would be appreciated.
Cheers
Read Answer Asked by Harry on December 13, 2017
Q: Hi 5i:
A previous question asked by Joseph today about the newly issued Series 21 Preferred Shares. I have that issue and it is currently listed as PPL.PF.A with my Scotia iTrade account. Hope this helps.
A previous question asked by Roy today, you listed PPL.PR.U as a minimum preferred to consider. That symbol I cannot find. Do you know what issue you are referring to?
Thanks so much.
Read Answer Asked by Dennis on December 12, 2017
Q: I presently hold this reset preferred which I bought at $16. I see the chances of interest rates rising not great. So I’m cashing in this investment to buy a minimum rate reset preferred. My object is to supplement my income with reasonable preservation of capital. I’ve had a good run on equities, the market is expensive, I don’t want to be caught offside. My portfolio is a dividend portfolio.
Read Answer Asked by Roy on December 11, 2017
Q: Six questions regarding pipelines:
(1) I understand that Enbridge finances most capital expenditures by way of debt or new equity, not retained earnings. I am thinking that this would be OK if its GAAP earnings per share are keeping pace with dividend increases and its debt service coverage is stable. Do you agree with these comments?
(2) I assume that the prospects for ENF are tied to ENB. Do you agree?
(3) Do PPL and IPL have the same policy as ENB regarding the financing of capital expenditures?
(4) Do you have preferences among ENB, IPL and PPL and, if so, why?
(5) If I am correct, ENB is mostly pipelines, PPL is mostly other midstream and IPL is somewhere in between. I have this idea that pipelines are more stable than other midstream activities. Is this simply wrong or an over-simplication?
(6) ENF, IPL and PPL represent 10% of my portfolio. Would you suggest lightening up? (I am retired and my portfolio is geared to income.)
Read Answer Asked by Carl on December 11, 2017
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.
Read Answer Asked by rajiv on December 04, 2017
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