Inter Pipeline (IPL.TO) Buy, Sell or Hold

Inter Pipeline (IPL.TO)

19.12

+0.28 (1.49%)

as of Nov 1, 2021, 8:00:00 pm Market Open.

714 watching

HOLD

Still favours it, but not a buy right here. Tremendous yield at 8.61%. Dividend's not in particular jeopardy. A hold right now. For pipeline stocks, the multiples and the leverage always look high, but that's how these companies exist, they borrow to build. As long as throughput is maintained, they're in good shape.

COMMENT

Safe dividend. Operates in Alberta plus BC, and doesn't face the pipeline problems that companies like Enbridge faces. A solid business. They don't suffer. This stock won't do anything until the entire oil/gas sector goes up, and that'll take some time. We need to see some takeovers in this sector.

BUY

TRP vs. IPL. He'd go with IPL. The yield is higher. TRP probably has the prospect of a couple of dividend hikes in the next year or two. Whereas hikes at IPL will probably be on hold because of capital expenditures. Quality of IPL assets is unassailable, and the new plant will be meaningfully accretive to their operating earnings when it comes online in 2021.

DON'T BUY

The dividend is not covered ($1.71 on expected earnings of $1.52). The quality of the balance sheet is not overwhelming. Technically it is showing signs of weakening. (Analysts’ price target is $27.20)

DON'T BUY

Pipelines take on a lot of debt. IPL's problem is that they're raising equity as their stock is down 25%. He's prefer Enbridge or Transcanada.

DON'T BUY

Used to own it. He sold high-dividend stocks in 2014-16, expecting interest rates started rising. Utilities are levered up, too. IPL has come down in price a lot so he's interested, but he expects interest rates to rise, so he wouldn't look at utilities for longer-term growth.

HOLD

It has come down a bit and broken its overall support level but the energy sector has been hit hard. If you are positive going forward, this is not a bad way to play the sector. He has not seen anything to say the dividend is not safe.

HOLD

Their payout ratio is fine. Going into 2020 if keeps rising it will reach 80%. Reasonable balance sheet. He doesn't model any growth.

COMMENT

Trading band of $21.50-28.50. It fell to a low of $18 at the start of 2016. He wants to see its low hold around $19. It it hits $21.50, he'd expect a quick jump to the middle of that band. But he doesn't see a catalyst and needs to see if there's be a move in interest rates tomorrow.

BUY

They've been challenged like all the midstream oil guys. They're okay. They slowed down their capex and sold non-core assets. This avoids going to market to raise equity.

TOP PICK

Transportation, storage and a propane dehydration plan. It appears oversold, dividend over 8%. If it takes 4 years to get to where it was 4 months ago, you will earn the dividend. (Analysts’ price target is $27.33)

BUY

Likes it; one of the better companies in this space. They have the contracted cash flow going further to pay their dividend and finance growth. The sector has too much oil and not enough pipelines

PAST TOP PICK

(A Top Pick Nov 30/17, Down 14%) Midstream energy has been challenging. IPL runs several businesses: nat. gas extraction which as recovered after depressed margins last year; cash flows coming from oil pipelines; storage which has struggled. When this backwardation clears, the margins should come back. Then there's a $3.5 billion propane dehydrogenation plant that'll be a great asset, that will crank out $600 million in operating profit yearly starting in late-2021. Until then, you'll pocket the dividend above 7%.

COMMENT

Doesn't have the same political problems as larger pipelines, as it's just in Alberta. Has suffered along with the rest of the sector. Excellent yield, last quarter was good. Doesn't suffer hugely from the price of oil, as you still have to move it. Yield is 8%.

DON'T BUY

Pipelines are defensive and their seasonality is summer, June 8-August 31. Since 2017, IPL has been in a declining trend. At least you collect a 7.6% dividend.

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Inter Pipeline (IPL.TO)