Market Overview

Credit Suisse Upgrades 4 Infrastructure Stocks


Four Canadian infrastructure stocks got upgraded Wednesday by an analyst making a pitch for dividend-bearing investments.

The four companies were upgraded to Outperform, from Neutral, include Brookfield Infrastructure Partners L.P. (NYSE: BIP), Enbridge Inc. (NYSE: ENB), TransCanada Corp. (NYSE: TRP) and Fortis Inc.

Brookfield and Enbridge were nearly unchanged in recent trading; TransCanada gained 2.2 percent and Fortis was up 1 percent.

Applying what he called a "dividend discount model," Credit Suisse's Andrew M. Kuske said the aim is to favor stocks with "visible dividend growth that isn't appropriately discounted in the stock price."

Such a view "compelled the upgrades," said Kuske, who also boosted his target 10 percent to $44 and maintained an Outperform rating on Emera Inc., citing similar reasons.

Bermuda-based Brookfield operates utilities transport and energy businesses worldwide and Kuske said its reputation for long-term "value" investing should power dividend growth "with a relatively low amount of risk."

Kuske boosted his target on Brookfield 9.5 percent to $46.

Enbridge, a Calgary-based energy distributor, has "clearly more potential for capital efficiency" but Kuske called it a "core holding" because of its high-quality infrastructure assets.

Kuske raised his target on Enbridge 34.6 percent to $70.

Fortis, a utilities company, has overcome issues associated with a recent acquisition and "has a large slate of organic growth ahead," Kuske said, raising his target 37.5 percent to $44.

TransCanada, a pipeline company, is "well positioned" in relation to both Alberta oil sands and West Coast liquified natural gas, with an improving outlook for capital efficiency and growth, Kuske said, boosting his target 17 percent to $68 a share.

Depending on the sector and length of time an investment is held, Kuske said compounded dividends can account for 40 percent to 70 percent of total returns.

Moreover, given current low interest rates, average dividend yields are running far higher than corporate or government bond returns, according to Kuske.

Latest Ratings for ENB

Apr 2019DowngradesOutperformNeutral
Mar 2019DowngradesOutperformSector Perform
Mar 2019DowngradesOutperformSector Perform

View More Analyst Ratings for ENB
View the Latest Analyst Ratings

Posted-In: Andrew M. Kuske Credit SuisseAnalyst Color Upgrades Price Target Analyst Ratings


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