Pembina Pipeline Corp (PPL.TO)

Energy went out of favour in Jan-Feb as prices weakened, so producers and service companies really got a good shellacking. It has become more apparent that the Saudi’s are trying to keep oil prices relatively higher. It is possible we are going to see more weakness in the group. Even though this is volume driven, there is going to be more weakness. On the long-term chart, it still looks okay. For him, he has moved into a bunch of other sectors that are behaving better. If you think prices can hold at these levels, it is an easy way to participate in energy.

This is currently an attractive entry point. The stock held up quite well through the whole energy decline. They are in the process of acquiring Veresen (VSN-T), which will add to their growth outlook going forward. A good income stock. Dividend yield of 5%.

A really quality name and has been for some time. They control many parts of the Western Sedimentary Basin, and are very strong. It is going to swing up and down with the commodity, even though they have no commodity sensitivity to its earnings. Doesn’t think you can go too far wrong with this.

Switch out of Bell Canada (BCE-T) to Pembina Pipeline (PPL-T)? An interesting comparison. He wouldn’t make the switch. They are very different risk profiles. BCE is a very stable business and you can rely on the dividend and not have to worry about it. Yield of about 4.8%.

An Alberta company and quite active in terms of moving oil and gas. It has done well and has a good dividend. One of the advantages of this company is that it is not an international pipeline, so it has a very few political problems. A good, long term investment.

PPL-T vs. ENB-T. In the energy space these have been stronger performers overproducers. With interest rates moving higher it will be a mixed blessing for pipelines. Their dividend does not look as attractive, but as interest rates go up so are their allowed rate of return through the regulator. Look for which one has the most consistent track record of dividend increases and the best record of dividend coverage. If it is the same stock for each factor, go with it and if not go with the latter factor.

VSN-T was a natural one to get acquired. He is going to hang on to the stock he gets in the deal.

Thinks energy infrastructure as a theme is now under some pressure with this new leg down in energy prices. Infrastructure tends to hold up better than the producers, but if it gets bad enough, they get impacted. This is one of the 2 strongest names in the Canadian universe, but if energy gets much worse, he is likely to reduce his weighting.

He thinks the transaction with VSN-T is fantastic. Cash flow per share will go up and it diversifies their hydrocarbon mix. It replenishes the pipeline of growth projects for PPL-T. Now they have over $20 billion in growth projects ahead of them. (Analysts’ target: $50.00).

They bought VSN-T. She owns PPL-T. She likes the acquisition as it gets them additional growth. Keep the PPL-T shares after the acquisitions. They offer an attractive dividend yield also.

He likes this because of their potential acquisition of Veresen (VSN-T), which will give them some run room and better diversification in the US. There is $20 billion of potential projects out there. Dividend yield of 4.7%. (Analysts’ price target is $50.)

Veresen (VSN-T) has offered to buy this company for $3 billion. The pipeline sector is not a bad place to be as a low beta in a choppy market this summer. They’ll pay good dividends. However, he doesn’t expect tons of upside. This is a little bit near the upper end of a trend channel, so it might round over a little. However, it is a good place to be for the summer because you’ll make some dividends and you won’t lose a lot.

TRP-T vs. PPL-T. PPL-T has been expensive historically because management is worthy of it and so he would go for this one. He owns EMB-T because of the advantage that whoever you have to pay bills to you should own them. They have growing dividends at 8-10%. He likes the premium management of PPL-T and it is worthy of an increased multiple.

This is just completing phase 4 and 5 of pipeline gathering in the Duvernay Basin. They are also major players in the Montney. That has given them a stranglehold on future production and gas processing in those 2 areas. They have also done a deal with Chevron, which is going to require them to do additional infrastructure spending on their behalf, which will increase cash flow and dividends. Dividend yield of 4.61%. (Analysts’ price target is $49.)

They announced 2 new projects in April, and boosted their dividend by about 6%. This has really impressive growth. He is modelling 30% EPS 2017-2018. A really nice dividend with a steadily declining payout ratio. Good dividend, and the balance sheet is in really great shape. Trading in line with the other pipelines, but with a much better growth profile. You can add to this on any small pull back.