Inter Pipeline (IPL.TO)

(A Top Pick July 26/17, Up 4%) Doing well until today. Earnings not bad, 20% over last year. Would stick with it. Likes management. Concern for people is system design on the oil sands, and oil sand are out of favour. Holding it for the yield, dividend not under threat. Yield around 6.9%.

Still owns a bit. Keyera and PPL are better ideas at this point. No place to get the world price of oil, but IPL still gets paid to move the oil. Growth for oil sands and IPL is limited. Selling was overdone, not a bad price now. Well run. Would be keener if they did more diversification.

He calls this an interest-sensitive stock. The dividend of $1.68 is not covered by earnings. Earnings estimates for this year and next are $1.46 and $1.41. Interest-sensitives have had a bounce recently, perhaps because people sense a slowdown coming. He is bearish on the group. He would buy this stock at about $19.60.

He has owned it for some time. It operates a large oil sands pipeline. They also have a mid-stream natural gas processing business. But they have take or pay contracts. The margin they make from this is high. A headwind is there storage business. Some of their markets disincentives storage. A nice catalyst down the road is the building of a dehydrogenation plant. It will be a meaningful catalyst for the stock down the road.

Can Canadian pipelines preserve their capital? Yes, they can preserve that capital in their existing operations--they are regulated utilities. It's the growth that's a concern. He has little exposure in this space, but does own IPL-T. Stay away from Enbridge (too much debt and uncertainty). Growth is limited among pipelines, which is why he likes IPL, because they are building now.

IPL vs ALA - He likes them both. There's upside in IPL. ALA pays a good dividend of around 8% and its prices has come down nicely so it's a good time to step in. If things turn around in Alberta, ALA will benefit with a nice move and institutional money will move in.

Pembina versus Inter Pipeline. PPL-T technically has a lid on the price chart, where it is now bouncing down away from. Until it breaks above $45 he would think it goes sideways. One has a better trend formation – albeit lower highs and lower lows. He would not be interested in buying this either.

What utility stock with low debt to buy? He owns no utilities like AQN and BLX, but he likes IPL-T. Has little debt compared to its peers. Safe dividend. A decent buy if you have a time horizon of a few years. Dividend of 7%.

He has been recommending it for three months. It has a 7% yield., There is the Heartland Petro Chemical plant they are building over the next couple of years. It should increase adjusted funds from operations over 4 years. He considers them fairly entrepreneurial.

He doesn't like pipelines for their interest-rate sensitivity. This is a decent name, but he wouldn't rush out and buy it. Keep it on your watch list. Below its current $24 share price is not bad.

His only concern with IPL are rising interest rates that will pressure these pipeline companies. He'd rather buy en energy producer like Pembina which has a comparable yield, but higher dividend growth.

The pipelines had pullback for its sensitivity to interest rates. Margins are good. They made an investment in Heartland Petrochemical complex that is giving them strong margins. Dividend seems safe.

It's in the middle of a major, transformational capital project worth over $3 billion project involved in propane. Alberta is awash in propane. IPL is benefitting by building this plant. It's taking a while to do this, because it's the first plant of its kind in Alberta, so there's a learning curve. But he's confident about the overall project which will enrich IPL's bottom line.

Results today were positive. They're funding and building an Alberta petro-chemical facility. He owns other companies in this space, but he simply can't own them all. Well-run, though has a flatter growth projection than its peers.

It has hit a rough patch. They are trying to grow. They are now getting into a major petrochemical project. He can see the business concept but the market has stopped it because they need to raise capital. He would prefer KEY-T and PPL-T who do not have to raise this equity and have similar growth paths and similar dividends.