Pembina Pipeline Corp (PPL.TO)

It has had two pretty good days in a row. They have smart management. They don’t care what the price of oil is. They are a toll road. They have growing dividends. Buy on any pullback.

He likes management. Very conservative and have done a good job taking some gas fractionation business and turning it more fee for service, annuitizing the revenue. Pays out a consistent dividend with over a 4% yield. Thinks growth is still pretty good, but not as good as it was before. He is thinking of slightly reducing his position.

They have done exceedingly well. Mid-streamers have been able to concentrate, interprovincial. They all took on the assets of the majors and this takes the assets into their rate base and then they raise dividends. If interest rates go higher then the discount factor on their dividend will go up. It is a name for conservative income investors.

He continues to like it. They have a great backlog of projects. They can drive cash flow and dividend growth. They benefitted tremendously in the last couple of years from increases in production. There is not a lot of commodity exposure. Investors need to get more comfortable with the cap-x plans that these companies have. Their ability to service their debt is very good.

A fee for service business, so they don’t have commodity price risk. It has a great pipeline of development projects that should see very strong growth of over $1 billion, coming online in the next year or so. It has had a 5-year history of increasing their dividend, which is currently at about 4.6%. A very solid performer.

He sold this because its multiple has gone significantly higher. It looks a little expensive.

(Market Call Minute.) Great visibility through to 2018. $5 billion worth of organic growth that they are going to be able to execute on, fully contracted and fully supported. Good cash flow visibility.

A really good strong story, and is in a high growth part of the basin. They have a lot of opportunity to grow their EBITDA. If you have a longer term horizon, this is definitely a Hold. She doesn’t own this right now, because valuation is a little rich. Dividend yield of 4.9%.

Has been taking a very good look at this lately to see if it might be one he would want to own. Pipelines tend to be expensive stocks from a valuation point of view, but that is because their income tends to be more regular. People pay a higher multiple for regular income. He would tend to look at TransCanada (TRP-T) today.

A provincial pipeline in terms of servicing mainly Alberta, BC and Saskatchewan, and not into the big political problems. Pays a pretty reasonable dividend. They service not only the regular industry, but the oil sands industry, which is part of the problem that he sees developing. With oil prices back into the $60 range, he doesn’t really see the long-term growth developing in the oil sands until prices get higher. Not a bad investment in your portfolio, simply because they produce a good cash flow.

One of the stronger names in the Alberta midstream space. Also, has the best competitive advantages. It provides investors with a pretty conservative strategy to play and participate in the recovery of energy prices. Dividend yield of 4.94%.

(Market Call Minute.) Have shored up their balance sheet and made an acquisition. They have the properties and have a guaranteed return on them, and he thinks it is hedged to the mid-$40 by the end of the year.

(A Top Pick July 16/15. Up 3.14%.) They increased their dividend 5% this year. Have a large contracted build program over the next 3-5 years, which is going to really increase their rate base and the amount of money they are making. There is likely to be a dividend increase over the next 4-5 years.

The whole energy sector is very similar to what happened in 1979. Given the nature of commodities you get an expansion that starts, and then has to continue because the price of commodities gets so high that it doesn’t make sense not to invest and move the stuff. There was a collapse in 1980 and oil bottomed in 1998, 18 years later. China has just finished industrializing and they are now slowing. Commodities are going to be struggling for the long-term, but it doesn’t mean you can’t make money. Has stayed away from the entire energy sector, with the exception of the pipelines. This is probably a decent stock, but you are probably better off moving into Amazon, Alphabet or Microsoft, where you will make more money in the next 5 years. (See Top Picks.)

5.75% Cumulative rate reset Class A issue. He bought this for his own personal financial plan, as he likes anything above a 4% interest. The beauty of this is that the reset is in 5 years at 4.7%, and in any event won’t be lower than the 5.75%.