Which Canadian Mid-Cap Pipelines Pay Out Safe Dividends?

Exploring 5 mid-cap Canadian pipelines that have maintained their dividends since oil prices have plummeted. Interestingly, some even increased their dividends twice in the last 12 months. Mid-cap businesses are safer than small-caps, and mid-caps could provide higher returns than large caps. Which of Altagas Ltd (TSX:ALA), Enbridge Income Fund Holdings Inc (TSX:ENF), Inter Pipeline Ltd (TSX:IPL), Keyera Corp (TSX:KEY), or Veresen Inc (TSX:VSN) pays out safer dividends compared with the group?

Mid-cap pipeline companies should provide higher returns than the large-caps when commodity prices improve because of the smaller sizes of the mid-caps. At the same time, mid-cap businesses are safer than small-caps.

This industry-wide dip makes the mid-cap pipelines attractive dividend investments for Canadian and American investors alike. However, it only makes sense to consider the mid-cap pipelines if their yields are sustainable.

Beware of high yields

One may be tempted to buy Veresen because of its 14.6% yield, the highest yield of the group. However, its high yield is solely because of its price decline; it has only maintained its monthly dividend from a year ago.

On the other hand, the other four mid-cap pipeline companies increased their dividends in the last 12 months. In the same period, Inter Pipeline increased its dividend by 6.1%, and all three of Altagas, Keyera, and Enbridge Income Fund increased their dividends twice for a total increase of 11.9%, 15.7%, and 21%, respectively. These four dividend growers have increased their dividends for at least four consecutive years.

Are Their Dividends Sustainable?

After analyzing their estimated cash flows for this fiscal year, Keyera and Altagas have the biggest margin of safety for their dividends. Their payout ratios are 40% and 50%, respectively. Veresen’s dividend is at the other end of the spectrum because Veresen’s payout ratio is over 100%, so its dividend is the most at risk of being cut.

This is primarily an excerpt. For more information, visit the article at: Which Canadian Mid-Cap Pipelines Pay Out Safe Dividends?

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Disclosure: At the time of writing, I’m long TSX:IPL.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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