The US stock market lost ground during the shortened trading week between September 6 and September 9 as investors were still unsure whether or not the Fed will raise the interest rates at the FOMC meeting scheduled later this month. On Thursday, well-known investor Jeffrey Gundlach, CEO of DoubleLine Capital, said during an investor webcast that the Fed intends to show that they are not depending on the market in decision-making and are likely to hike the interest rates when the market does not expect it. The information may have spooked investors as both Dow Jones Industrial Average and S&P 500 indexes slipped on Friday and ended the week with losses of 2.2% and 1.98%, respectively. On the other hand, on Tuesday the ISM Non-Manufacturing Index data showed a drop to 51.4 in August from 55.5 a month earlier and lower than the expected 55.0, which the market took as a sign that the rate hike is unlikely to come in the near future.
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Among financial advisors the sentiment towards individual stocks seems to have remained mainly unchanged during the last week, as TrackStar’s list of the financial advisors’ most searched tickers showed. The data compiled by TrackStar, the official newsletter of Investing Channel’s Intuition division, showed Apple Inc. (NASDAQ:AAPL), Bank of America Corp. (NYSE:BAC), and Alphabet Inc. (NASDAQ:GOOG) in the first three spot, followed by Amazon.com, Inc. (NASDAQ:AMZN), which jumped several spots compared to the previous week. Overall, technology stocks dominated the list of the 20 most searched tickers. On the other hand, the least represented sector was energy, with just one entrant and in this article, we are going to take a closer look at it and assess the latest developments.
Spectra Energy Corp. (NYSE:SE) is not just the only energy stock featured in TrackStar’s top 20 list, but is also a newcomer to the top. The stock gained over 18% during the trading week, mainly on the back of a jump on Tuesday registered on the back of the Enbridge Inc. (NYSE:ENB) announcement to acquire Spectra Energy. Enbridge, a Canadian pipieline operator, will purchase Spectra in an all-stock deal, which values the latter at around $28 billion. Under the terms of the deal, shareholders of Spectra Energy will receive 0.984 shares of the new company per each share of Spectra Energy they hold, which translates into approximately $40.33 per Spectra Share. After the combination is completed, Enbridge shareholders will own 57% of the new company, while Spectra Shareholders will own the other 43%.
The deal was well received by investors of both companies, as Enbridge’s stock also surged by around 8% during the last week. It’s not surprising, since the merger will create the largest North American energy-infrastructure company that would be able to operate better in an environment marked by lower oil prices. The new company will have a pro-forma enterprise value of around CAD 165 billion ($127 billion). The transaction is expected to be closed in the first quarter of 2017 and is subject to shareholder and regulatory approvals.
Amid oil prices holding below the $50 level many energy-related companies have been under pressure regarding their capability to maintain their dividend growth. Both Spectra and Enbridge’s stocks have dividend yields of around 3.80% and made promises to investors to keep a steady dividend growth. The combination of Spectra and Enbridge, will allow for 96% of cash flow to be generated through cost-of-service, take-or-pay, or fee-based contracts and the company will be able to provide a 15% annualized dividend growth in 2017, followed by 10% to 12% dividend growth per year through 2024.