December 13, 2018

Versen Inc (VSN)

Versen Inc (VSN) is an income trust that was incorporated when the tax rules shifted at the beginning of 2011.  For those of you that are not familiar with difference in corporate structure, basically, as an income trust in Canada companies were allowed to pay out dividends to their shareholders and circumvent a lot of taxes.  These tax advantages allowed for incredible yields in the double digits.  The Canadian government realized that it was losing a substantial amount of tax revenue as more and more companies began using this income trust structure and closed the option in January, 2011.  The only exception to this rule is Real Estate Investment Trusts (REITs) will still exist in Canada (they were allowed to keep the tax-advantages to encourage new building developments).  This was not the only change for the stock in 2011.  The Calgary-based company was formerly known as the Fort Chicago Energy Partners (FCE.UN-T) and obviously changed their name to Veresen when they entered their new corporate re-structuring.  Apparently the name is a derivative of the Latin phrase “vis vires” and then english “energy” which loosely translated means “with power, force, strength, energy.”

 

Veresen (VSN) is an energy infrastructure company that primarily relies on taking energy from Canada and transporting it to the USA.  They have three primary divisions of business – power generation, natural gas liquids, and pipeline transportation.  This diversification of energy assets give Veresen a strong stability factor that not all energy plays enjoy.  The pipeline segment is the major money-maker for Veresen (VSN) and consists of two major pipeline systems.  The Alliance pipeline is 3,000km of pipe that transports natural gas to the Midwestern USA from Western Canada.  The other pipeline is the Alberta Ethane Gather System, which helps spur Alberta’s petrochemical businesses.  Veresen’s power generation operation has been branching into areas of “greener” energy and they believe that this innovative area will be integral to their long term growth.  They also cite acquisition activity as a large part of their long-term game plan.  Their lengthy contracts in a variety of areas add to the company’s allure as a stable, profitable, dividend player.

 

While many people were concerned about what affect the new taxation rules would have on former income trusts, Veresen (VSN) has done very well since its incorporation.  The tax structure of the company does not change the fundamentals of energy supply and demand, or the company’s solid underlying assets.  Because of this reality Veresen has been able to maintain a solid dividend yield of about 7.5% while trading around $13 per share.  This yield is high despite the relatively expensive price-to-earnings ratio of 25.  This shows just how much faith the markets have in the energy transportation giant, and the future of the industry.  Dividend investors should note that Versen (VSN) offers a great Dividend Re-Investment Plan (DRIP).  If you choose to automatically re-invest your substantial dividends into more Veresen stock, you will automatically receive a 5% discount on the stock price.  This is an immediate return on your investment, and a perfect way to easily dollar cost average over a long period of time.

 

Versen Inc (VSN) Dividend Stock Graph:

TSE VSN

Versen Inc (VSN) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
VSNVeresen Inc13.77.3182.040.961.020.00

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