December 10, 2018

The Pembina Pipeline Corporation (PPL)

The Pembina Pipeline Corporation (PPL) is another company that has recently seen a corporate restructuring as it went from an income trust, to becoming an incorporated entity.  If you are not familiar with the reasoning behind all these recent moves, the Canadian government switched the taxation rules on almost all income trusts beginning in 2011.  Up until this year, companies had found that the income trust structure had several advantages that allowed them to payout extremely high dividends to their shareholders.  The only industry that was allowed to keep the old advantages was real estate-based trust funds, more commonly referred to as Real Estate Income Trusts (REITs).  While the government is taking a somewhat larger bite out of many of these newly incorporated entities, there are still plenty of profits to go around.

 

Pembina (PPL) became a publically traded company in 1997.  Since that time it has seen extreme growth, and has paid out an extraordinary $1.5 billion dollars to its investors, while at the same time seizing acquisition opportunities.  The company has always sought to be a cost-effective, profitable entity that can pass along substantial cash-flow to their stakeholders.  One of their key strategies has been (and will continue to be) to diversify their asset portfolio in order to provide long-term value for shareholders.  They seek to lessen the risk associated with market volatility in a single sector.  That being said, they will continue to focus on the core of their business – the ultra-profitable crude oil and natural gas transportation industry.  The Pembina Pipeline Corporation (PPL) is also extremely proud of their environmental record within a controversial industry, and their outstanding history of community engagement.

 

Pembina’s two major pipelines are the Nipisi Pipeline and the Mitsue Pipeline.  Nipisi is designed to transport 100,000 barrels per-day of heave oil.  It runs from North of Slave Lake, Alberta, to Swan Hills, Alberta, and from them to Edmonton, Alberta.  Plans for expansion of the pipeline to a 200,000 barrel per-day limit are in place.  The Mitsue pipeline is smaller, but still significant.  It was originally built to transport 20,000 barrels per-day of condensate (which is used to refine the heavy oil) and runs from Whitecourt, Alberta, to Swan Hills, Alberta.  Plans are in place to expand this pipeline as well, taking it up to a capacity of 45,000 barrels per-day.

 

While Pembina (PPL) has plenty of competitors within the huge Canadian energy sector, its fundamentals hold up quite well.  It’s currently trading at around $25 per-share, with a price-to-earnings ratio of 22.85.  Its annual dividend of 1.56 (paid monthly) gives it an attractive dividend yield of 6.2%.  Given the strength and future outlook of the Canadian energy sector, investors looking for strong dividend performers really can’t go wrong with many of the options that are offered.  Pembina Pipelines certainly belongs in the discussion if you’re looking for a high-dividend position with exposure to the energy sector.

 

The Pembina Pipeline Corporation (PPL) Dividend Stock Graph:

TSE PPL

The Pembina Pipeline Corporation (PPL) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
PPLPembina Pipeline Corp23.46.67143.330.427.630.00

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