Energy delivery company Enbridge Inc. announced on Thursday that its next quarterly common share dividend will be increased by 33%. It also unveiled a Canadian restructuring plan as well as a new dividend payout policy range.
The next quarterly dividend will rise to $0.465 per share, payable on March 1, 2015, to shareholders of record on Feb 16, 2015.
The Calgary-based transporter and distributor of crude oil, natural gas, and other liquids said these actions are aimed at improving the value to investors of its record organic growth capital program and “enhancing the competitiveness of its funding costs for new organic growth opportunities and asset acquisitions.”
The company announced 2015 adjusted EPS guidance of $2.05 to $2.35.
Its Canadian Liquids Pipelines business – Enbridge Pipelines (Athabasca) Inc. (EPA) and Enbridge Pipelines Inc (EPI) – will be transferred to its Canadian affiliate Enbridge Income Fund (EIF). “Enbridge Income Fund Holdings Inc. (TSX:ENF) (EIFH or Holdings) is expected to acquire an increasing interest in the assets through investments in the equity of EIF over a period of several years in amounts consistent with its equity funding capability,” the company added.
After Mr. Monaco’s announcement, shares surged by 20%.
It expects EIFH’s dividend growth rate to be approximately 10% annually from 2015 to the end of 2018.
A revised dividend payout of between 75% and 85% of adjusted earnings has been approved by the Board of Directors, compared to the previous policy range of 60% to 70%. Enbridge’s resulting dividend growth per year is forecast to average between 14% and 16% from 2015 to 2018.
The company is also considering a parallel US restructuring plan which would transfer its directly held US Liquids Pipelines assets to its US affiliate Enbridge Energy Partners L.P. (EEP).
President and CEO of Enbridge Inc., Al Monaco, said regarding today’s announcement:
“The 33% increase in our dividend that we announced today and 14% to 16% expected annual average dividend growth rate through 2018 reflects Management’s confidence in the strength and embedded cash flow growth from the existing assets and the capital projects that will be put into service over the next four years. The change in our dividend policy range to 75 – 85% of adjusted earnings is supported by the excellent progress we’ve made on our enterprise-wide funding program, raising some $16 billion in debt and equity capital over the last two years; the expected increase in free cash flow through 2018; and reliable access to effective sources of equity funding including from our sponsored vehicles.”
“Our plan to transfer the Canadian Liquids Pipelines business to Enbridge Income Fund comes after an extensive review of the potential to further enhance the value of our $44 billion growth program and lower the cost of funding for that program and for new investment opportunities. We believe that the drop down of our Canadian Liquids Pipelines business into the Fund will transform it into a high growth vehicle and be beneficial for shareholders of both Enbridge and Enbridge Income Fund Holdings, while continuing to assure the funding of our organic growth program.”