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Enbridge Energy Partners, L.P. Message Board

  • valueseeker890 valueseeker890 Feb 3, 2004 12:57 AM Flag

    Earnings don't justify dividend

    In 2003, Enbridge Energy Partners paid $ 3.7 per share in dividends.
    EPS were $ 1.93.
    Depreciation was about the same as earnings, so in effect they paid
    out earnings plus their ENTIRE depreciation.
    I read in Smart Money Magazine that pipelines last about twice as
    long than their assumed lifespan for depreciation, so half the
    depreciation taken would be justified as an expense to arrive at
    economic earnings.
    However, since EEP pays out the entire depreciation, does that not
    mean they pay out more than their economic earnings?
    They get their money back by constant stock offerings.
    That looks a bit like a pyramid scheme to me.
    What am I missing?

    Please help.

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    • Its hard to calculate unless you really know all the ins and outs, I don't.... I know that alot of the MLP's will give out a rough number for DCF usually in cc, although I have seen it in Q reports(XTEX did it most recently), of course , there is always the easy way out, just pull up the latest copy of AG Edwards research...and hope they got it right.

      Other than than, I have work backwards before, if they tell you how much of a coverage ratio they have, then you can figure out how many shares are outstanding, what the distribution is(and the GP cut, the GP tables are almost always in the Annual reports in the backc, then work back from there. Its a messy ordeal if you don't know the capex numbes...

    • Is everything in the DCF calculation you describe is directly available from public financial info, and how much is not?
      Income and depreciation are in the quarterly statements (is it as simple as net income + depreciation/Amortization-operations + dep/Amort-g&A), but is the data that makes up capex available?

      Related Q: I assume the MLPs are not, and generally don't, calculate and report DCF. true?

    • Earnings, plus reduction in AR, raised the cash for dividends. There are other reasons to worry about leveraged companies like this, but in this case they didn't sell their seed corn so take that worry off of your plate.

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