Inter Pipeline (IPL.TO)

(A Top Pick May 13/15. Down 16.8%.) Trimmed his holdings a little, but it is still a top 10 holding for him. Reported solid earnings and feels the dividend is solid. Has diversified a bit with oil storage in the Danish Straits, and they are still getting increased flow in their pipelines with the oil sands. They sign 30 year take and pay contracts, so are not vulnerable to the oil price in the immediate. Very comfortable holding this.

Hasn’t recommended this recently, mainly because of what is going on in the energy patch. Unless we get oil prices to the stage that it is attractive enough to do additional projects, he wouldn’t be looking to Buy. The dividend is secure.

Energy has become mass manufacturing. Whenever a new equity deal comes to the table, investors want to buy it. He worries about volumes of production and therefore pipeline utilization. This is the problem with infrastructure companies. He would focus on integrated oil companies.

This is a utility, so shouldn’t be volatile, but it is. Has 20 year contracts to the oil companies. Also, oil sands development is still growing. Their capital structure is fine. They got hit with the whole oil price situation. This has been oversold and overdone. Dividend yield of 7.3% is sustainable.

Had been Short this. An expensive company and has got pretty lousy price momentum, and given its status as a pseudo-utility, it is pretty poor. High yield of about 7.5%, but has a high payout ratio, which should be questioned. Could be at risk of having a dividend cut. Reasonably low ROE and trading at 26X Free Cash Flow. Not something he would want to hold here.

A very well-managed company with a strong cash flow profile. The opportunity for pipeline growth is diminishing. A company like this is good for a safe, secure dividend, but the market doesn’t like that its growth profile is limited. Dividend yield of 7.6%.

Most pipeline stocks have pulled back along with the energy sector. They are more defensive, this one in particular, in the sense that they carry crude through their pipelines under long-term service agreements, so it is less price sensitive. This one has gone through a big CapX expansion program in 2014-2015, so this year that has come down quite a bit. The dividend is safe, but she would expect increases will not be as high as they have in the past. 7.5% dividend yield.

Energy as a whole will be volatile, but the 1^st place we are going to see a sort of safer bid will be in a pipelines. Chart shows a recent small nascent break to the upside which is very positive. He would look at this on a short-term basis, and then add to it if it proves itself based on that trend. Dividend yield of 6.8%.

He sees the Canadian market going down another 15%. He predicts $17.65, or it could rally as a trade. His model price is $27. If it broke down from where it is here ($22) he would sell.

Pipelines have come down significantly with the rest of the energy sector. He does not see the great justification in this. They are not getting more or less revenue based on the price of oil. Long term it could affect them, however. It is caught up in something it should not be and so is presenting an opportunity.

Pipelines in Canada and energy storage assets in Europe. Has come down a lot. He likes this one. People are concerned about the price of oil, but 85% of their revenues and EBITDA are contracted, and there are large companies that still want to move their oil. As oil bottoms and recovers, people will realize that this is not tied to the commodity. Very good management. Dividend yield of 7.3%.

Are pipelines safe as long-term holds? For the next few years, pipeline cash flows are safe, particularly with this company. Increased the dividend in December by about 6%. It is coming off a strong CapX program from 2014. This means that going forward their cash flow growth will slow, because they do have excess capacity on one of their oil sands pipelines. Because crude prices are declining, there is less pipeline demand. It just means it may take longer for them to fill up that excess capacity. However, what they have flowing through, is really protected through long-term service agreements or pass through agreements, so there is very little price risk. The dividend is safe, but you’ll just see slower dividend increases.

He has had some mid-stream exposure. This one has a lot of exposure to Canadian Oil Sands. There is a lot of concern about growth prospects with $38 oil now, post 2018/19. The dividend is safe.

A stock that did very well in the run-up of the oil sands, and it got quite expensive. It was priced to keep growing. Thinks it was 22X EBITDA, and it is now 11, so the premium has come way out of it. There is not a lot of direct commodity exposure, although they are exposed to volumes of the oil sands.

Likes this for their Take or Pay contracts. Cash flow and dividend growth is there. Looking out to the future, dividend growth is not as strong because pipeline opportunities are not as strong as they have been historically. This is a great way to maintain exposure to the oil sands space, rather than going to an oil sands producer. You might see a little bit of weakness for the time being.