Pembina Pipeline Corp (PPL.TO)

No problems from an operational point of view, but his problem with the pipelines is valuation. 20 times earnings for 5% earnings growth. They benefited from the run to safety and this will run out in the next couple of years.

Dividend is safe. The group, by association with oil, has been hit. This one has exposure to gas growth in Western Canada, which now is a little dicier for LNG further out, so there is a little bit of bloom off of the growth. It is still going to be fine, but it was trading at a huge valuation, so it had to come off. In the short term, it will go up and down with oil/gas prices, and the stock will probably go sideways.

End of January until May of each year is the seasonal strength. Hold it as it makes a base. Or wait for technicals to be in your favour.

Energy has more of an indirect relationship to their natural gas exposure. They have been making a lot of money in the last few years, taking liquids out of natural gas. That business has been hurt to some extent, but the good news is that they have been rapidly reorganizing their business towards “cost of service” type contracts. Thinks they will get through this. They have less risk on the commodity side than they used to. If you don’t own any of these stocks, it is time to look at them.

Really likes the entrepreneurial and midstream pipelines, because they tend to do smaller projects, generally within one province which can get much more readily approved. Has owned this for a long time and thinks the yield is sustainable. It will be affected by the drop in the oil price and any movement in the price of gas, but it will only be affected in an impairment kind of way if this drop goes on for a considerable period of time.

If you don’t have the position right now and want to establish one, she would start with a half position, and then as energy kind of stabilizes, fill it up. Fairly confident in the cash flows because the projects they have in place are in long-term service agreements, so they are going to be paid regardless of what energy is doing. The concern would be if energy stayed low for a long period of time, so any potential additional projects that come on board beyond a 2 year time frame would start impacting their ability to grow their cash flow and their dividends.

He likes the infrastructure aspects around this company. There is nothing negative in their business environment that has caused the stock to sell off. Views this as a good entry point.

This is kind of a 2 edged sword. They have a nice dividend yield. Also, the stock has set back, pretty much to some good technical support from his perspective. Negatively, like all Canadian pipeline companies, it is selling at, or marginally above its FMV. Looking at the long historical sweep of the valuations, none of these pipeline companies are cheap. Because he thinks investors will continue to place a premium on income, the stock may well hold up. He would not initiate a position in this or any of the pipelines.

If oil were to base at $70, or in a worst-case scenario it is below $60 for a protracted period, he feels the dividend could survive. Yield of 4.12%.

Large holding for him. It got way ahead of itself. Big dividend. Huge number of secure projects in the `pipeline`. It got pounded with the oil price and yet it should not have had that much of an impact.

Has some commodity exposure: frack spread. But he thinks it is a very high quality business. There is still a significant cap x program for them to drive organic growth. When it slows down you will see more acquisitions for growth. There is great value here. It is just a matter of what you want to get exposure to. It is great value.

This is a sector that he has never sold in this decline. It will be a good entry point come January.

It is too soon to get into it. Mid-stream players saw their valuations go way up in the search for dividends. Then they moved up higher because of the growth rates. But only a portion of the projects are secured. There is risk that the valuations could contract.

A really good company. In the last 5 years, it has been one of the best performing stocks in the country, and has done extremely well. Has done well in the last year because of momentum. There is a lot of momentum money run by a a lot of managers, who just look for stocks that are meeting or beating expectations. That is the caution with this stock. It was doing this for a long time and is now facing a pullback in the energy sector. Pipeline companies are much more stable than E&P companies, but they will pull back on sentiment with them. Feels there is more pullback to happen. Feels this is on its way to $30, so he would be a little bit cautious.

Has been hit very hard with the decline in crude prices. Have a lot of projects in their backlog, and those projects have long-term “take or pay” service agreements in place, so they are fairly protected. Even if crude oil prices drop, these projects are there and they have customers that have made commitments to make payments to them. This will become a much more defensive cash flow story. She doesn’t see this as being at risk for the next couple of years. Feels the dividend is safe.