Michael SprungSouth Bow CorpSOBOHOLDNov 27, 2024

Oil pipelines. Sold around $38-39, simply because it was in his dividend growers mandate and its prospects on this were meager. Juicy yield, but you need to look at total return.

Received shares as spinoff from TRP, a name he still holds and prefers.

His preference is TRP -- it has the gas assets, whereas SOBO has the oil assets. Spinoff happened because TRP wanted to lose the discount of oil. Negative sentiment on oil had hurt the multiple, while investor view on nat gas was a lot more positive.

In the space, his ranking is ENB at #1, then PPL, then TRP. 

Slow growing, high-dividend payer, and people hold it for the dividend. Lots of capital projects to unlock bottlenecks in production, so the dividend yield could creep higher. Keystone pipes are rusted and unusable, so resurrecting that line brings with it a lot of questions.

Really safe, payout ratio of 71%. They did have a leak, but market seems satisfied that it's not systemic. Chart shows that it's technically at the high end, a bit overbought. Valuation is well-anchored at 14x compared to higher peers. 10% EPS growth. Very high-quality, high-contracted, stable cashflows. 

Could buy a bit here, but he expects some sort of pullback in the next few weeks. So use the chart and buy then. Yield is 7%.

Grinding higher. Infrastructure companies will have opportunities as power demand in NA continues to be robust. There's also a rate-cut story at play. If we don't get a cut in September, markets could have a tantrum with some of the interest-rate sensitive names pulling back. That's a short-term dynamic.

Spun off from TRP, initially not well received. With time, market got behind it. Has done well. Bit volatile, but relatively strong since the spinoff. Likes it going forward. Perhaps it gets sold. If you hold it, collect the yield of 7%. That's your upside. Downside is more problems with the pipeline, and there have been many. He's happy to hold and see what happens.

Crude oil pipeline. Pipelines are generally more defensive in the energy patch. In future, if pipeline development is more welcome in Canada, that would benefit existing companies. Nothing wrong with this name, but she already owns ENB and PPL.

Likes the oil patch broadly speaking, and it's fairly low risk.

Quality company that is very safe. Dividend is excellent with strong assets and management. Would recommend holding for yield oriented investors. 

He sold it early when it was spun out. SOBO owns the rights to Keystone, but they have the land back after Biden cancelled it.

Entirely a liquids pipeline business. He likes it because there's no growth, so there's very little you can do with it. Management has nothing to spend $$ on, so it'll return cash to shareholders. Yield is 7-8%, reasonably well-covered by cashflows, should grow to some extent.

In a spin-off, look how the market treats the underlying investment, and SOBO is up 20-25%. He has increased his holding in this, but it isn't a core holding. SOBO (running a liquids pipeline) can offer exposure to the Keystone pipeline, which Trump says he wants to finish. Canada doesn't tend to double-up on pipelines (TC Energy and Enbridge already run pipelines. He'd wait and see on SOBO.

Only real growth will be multiple expansion and what value people will give to the dividend. Owns 100% of Keystone, its key asset. High quality, very stable cashflows (~94% recurring). Pretty cheap PE. Yield proxy. Yield is 8-9%.

He sold right after the split, as the growth assets and those with better potential were assigned to TRP. SOBO got the oil pipelines, which are great for an income-generating dividend, but no growth. Stock's done well, but don't buy here. Look at TRP.

Lots of pipelines, mostly US assets. Gives you diversification into US markets. Could be $40-50 a year from now. Pretty safe. Will probably hold above $34-35 over the next year. Good quality dividend yield of 7.5%.