Tag Archives: NYSE:PBA

3 Top Dividend Stocks For 2020

Summary

  • 10 authors (including me) chose 1 top stock each for 2020.
  • I chose Pembina Pipeline as my top idea. I explain why below.
  • Earlier this month, I bought Pembina Pipeline and TD Bank for their safe ~4-5% yields and reasonable valuations.
  • I will consider buying Intact Financial in the future.

Ten contributors at Motley Fool Canada (including myself) put together a list of top Canadian stocks for 2020. My fellow colleague, Chris Liew, coincidentally chose the same top idea as me, so there are nine top stock ideas instead of ten.

My top stock for 2020 is Pembina Pipeline (TSX:PPL)(NYSE:PBA). Just like my top stock pick of Enbridge (TSX:ENB)(NYSE:ENB) for December 2019, I chose Pembina as a defensive name that pays a nice dividend. They’re both energy infrastructure companies that generate cash flow that is quite stable

From the remaining 8 names, I also like TD Bank (TSX:TD)(NYSE:TD) as a solid dividend investment, while Intact Financial (TSX:IFC) is a quality business that I’d consider buying in the future.

pretty young lady thinking

Pembina Pipeline yields 5%

Pembina offers nice monthly income and stable growth, which in combination, can deliver long-term total returns of roughly 10-13% per year.

Mick Dilger has been Pembina’s CEO since 2014 and before then, he was the company’s COO. Since 2014, the company has increased its operating cash flow per share by about 14.8% per year.

Pembina just completed the Kinder Morgan Canada acquisition earlier this month, which was ahead of schedule. Keeping its promise, Pembina increased its monthly dividend by 5%.

The forward yield is nearly 5.2% based on the higher monthly dividend of CAD$0.21 per share that will be declared in January 2020 and payable in February 2020.

Pembina has a track record of growing its profitability. It has increased its adjusted EBITDA over time. Based on its midpoint guidance, Pembina’s adjusted EBITDA per share will grow about 6.4% from 2019 to 2020.

graph showing Pembina Adjusted EBITDA from 2016-2020
Source: December 2019 Presentation (pdf), Slide 23

Pembina is a trustworthy dividend stock. It has maintained or increased its cash distribution or dividend every year since its income fund days as early as 1997. In late 2010, Pembina changed to a corporation. Since then, it has increased its dividend by almost 62%, while reducing its payout ratio over time.

The energy infrastructure company is committed to maintaining a payout ratio of less than 100% of fee-based distributable cash flow. This payout ratio is estimated to be roughly 78% in 2019, which is much lower than 2015’s 135%.

Therefore, Pembina stock has been increasing its dividend payout, while improving the safety of its monthly dividend.

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5 Top Stocks for November 2019

Contributors at Motley Fool Canada (including myself) cooked up a list of 16 top stocks for November 2019. I further reduced it to 5 top stocks that I like not just for this month but for the long term as well.

Four of the 5 stocks pay a dividend, including 3 dividend stocks that offer juicy but safe yields of up to 6.1%. Without further ado, the 5 top stocks are Alimentation Couche-Tard (TSX:ATD.B), Enbridge (TSX:ENB)(NYSE:ENB), Pembina Pipeline (TSX:PPL)(NYSE:PBA), SmartCentres Real Estate Investment Trust (TSX:SRU.UN), and Spin Master (TSX:TOY).

Enbridge and Pembina are both energy infrastructure companies, but Enbridge is markedly larger with an enterprise value of almost CAD$174 billion compared to Pembina’s more than CAD$34 billion. The rest of the stocks are in different spaces and together handily make a pretty diversified and quality portfolio.

Alimentation Couche-Tard for long-term growth

Source: Author – One of Couche-Tard’s Circle K locations in Toronto

Couche-Tard just had a stock split recently. The growth stock has simply been taking a breather and consolidating after running up more than 50% from early 2018.

Couche-Tard is an exemplary M&A growth story. It has successfully acquired about 10,200 stores across 60 deals since 2004. In the period, the stock delivered total returns of 21% per year! 

The company only yields 0.6%, but its payout has shot up at a rocket pace — over 8 years, its dividend has increased at a compound annual growth rate of 27.8%! Its last dividend hike in fiscal Q3 was 25%!

Going forward, as Couche-Tard has matured and heading into its 40th year next year, it’ll be shifting its growth focus from 70% acquisitions and 30% organic in the past to 50% from each. Management still sees growth by acquisition opportunities in the fragmented fuel and convenience industry.

Today, at $39 and change per share, the stock trades at a forward price-to-earnings ratio (P/E) of 18.5, which implies a decent PEG ratio of about 1.6 based on the estimated earnings growth of 10.6-12.3% per year over the next 3-5 years. 

Enbridge offers a safe 6.1% yield and stable growth

Enbridge has worked hard and come a long way after taking on too much debt to acquire Spectra Energy in 2017 and selling off non-core assets to reduce the debt levels.

The stock was also depressed by delays in the Line 3 Replacement project. That said, if Enbridge successfully places the Canadian portion of the project into service as it plans to for this quarter, the stock should shoot up much higher by year end. 

ENB Dividend Yield (TTM) Chart

ENB Dividend Yield (TTM) data by YCharts

Assuming a fair yield of 4.5%, the stock should trade at CAD$65.60 per share. First, the stock needs to break above the CAD$50 resistance, though.

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Industry Pullback: Buying Opportunities In Dividend Growth Stocks

This article first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Six dividend growth stocks from the energy infrastructure space are discussed. They offer yields of 4.6-7.5% and double-digit price appreciation potential in the near term.

The energy infrastructure stocks have pulled back meaningfully due more or less to the lower commodity prices. These stocks are safer and less volatile than energy stocks, which have direct exposure to lower-priced commodities.

For income investors, it is a good opportunity to consider the energy infrastructure stocks, which tend to grow their dividends over time.

oil refinery

Enbridge Inc. (TSX:ENB)(NYSE:ENB)

Enbridge is the biggest company with the largest scale. Here’s how the company looks like after combining with Spectra Energy Corp. If you’re looking for safety and strong dividend growth, Enbridge is your stock.

Enbridge is ~15% below its 52-week high of ~C$59 per share and ~1.8% higher than its 52-week low of C$49.20 per share.

Enbridge is a diversified business. It produces and processes natural gas, has a complex pipeline system that transports liquids and gas across North America, and generates power with wind, solar, and geothermal facilities.

The company has increased its dividend per share (“DPS”) for 21 consecutive years. In the last 20 years, it has compounded its DPS by 11.2% per year.

Source: Enbridge website

Through 2024, Enbridge expects to hike its DPS by 10-12% per year. Currently, it’s a good time to buy some shares at an attractive yield of ~4.9%.

The street consensus at Thomson Reuters [TSX:TRI](NYSE:TRI) has a mean 12-month target of C$62.30 on the stock, which represents ~24% upside potential in the near term.

F.A.S.T. Graphs also show that Enbridge is undervalued as a multi-year investment as its cash flow per share growth is estimated to grow at a double-digit rate in 2018 and 2019.

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