Tag Archives: TSX:PPL

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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Great Canadian Dividend Buys: Large-Cap Pipelines

Exploring 3 large-cap Canadian pipelines that have continued to maintain and increase their dividends since oil prices plummeted. Which of Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), or Pembina Pipeline Corp. (TSX:PPL)(NYSE:PBA) pays out the safest dividend of the group? Which company has the best dividend prospects? Should investors buy these Canadian pipeline companies now or wait?

Kinder Morgan Inc (NYSE:KMI) got a lot of attention when it slashed its dividend by 75%. At the same time, its share price has fallen over 60% from more than $40 to under $16. Yet, strong Canadian energy infrastructure leaders such as Enbridge Inc and TransCanada Corporation have not only maintained but continued to grow their dividends. At the same time, they have also been sold off due to lower oil prices.

  • Enbridge increased its dividend by 14% this year and it would be its 21st consecutive year increase.
  • TransCanada should be announcing its dividend hike for this year by the end of March, which would be its 16th consecutive year increase.
  • Pembina hiked its dividend by 5.2% in May; it has increased it for 4 consecutive years.

Are Their Dividends Sustainable?

Enbridge, TransCanada, and Pembina Pipeline are only more attractive than a year ago if they can maintain healthy dividends. Can they? Read More

Canadian Energy Stocks to Buy Now

After the oil price plummet, you may be looking to invest in the top Canadian energy stocks. Thinking of Suncor Energy Inc. (TSX:SU)(NYSE:SU), Enbridge Inc (TSX:ENB)(NYSE:ENB), or Inter Pipeline Ltd (TSX:IPL)? Well, among these, other common integrated oil & gas companies and midstream companies will be discussed.

Integrated oil & gas companies and the pipelines are the safer energy companies. Canadian energy stocks such as Suncor Energy Inc. (TSX:SU)(NYSE:SU) are integrated oil & gas that are involved with upstream and downstream operations. Because their businesses are multifaceted, their businesses are more stable than energy companies involved only in upstream businesses. Upstream operations include oil & gas exploration and production, while downstream operations include refinement, marketing, and distribution of the commodities.

The pipeline businesses generate stable cash flows by transporting and storing energy. Their services are mostly fee-based so their profitability are less affected by the oil price.

I put together a list of Canadian energy stocks that are integrated oil & gas companies or pipeline companies. They all turn out to be dividend stocks which help with portfolio returns because shareholders receive income even in a down market.


However, integrated oil & gas company dividends may not be reliable because the company profitability is based on the commodity prices. As we’ve seen in the past year, some energy companies had to slash their dividends. Cenovus Energy Inc (TSX:CVE)(NYSE:CVE) was one of them.

For the data analysis, I compared the energy stocks’ trailing twelve month (TTM) earnings per share (EPS) and operating cash flows from 2014’s. I’m also comparing the latest quarter’s debt-to-equity (D/E) to 2014’s. I will also include the D/E ratio. The above is checking the stocks’ profitability and debt levels in this low oil price environment.

The integrated oil and gas stock list includes Suncor Energy, Imperial Oil Limited (TSX:IMO)(NYSE:IMO), Husky Energy Inc. (TSX:HSE), and Cenovus Energy.

The oil and gas midstream list includes Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Pembina Pipeline Corp (TSX:PPL)(NYSE:PBA), Inter Pipeline Ltd (TSX:IPL), and Keyera Corp (TSX:KEY).

Without further ado, let’s explore the integrated oil & gas Canadian energy stocks to see which one you should buy.

Which Integrated Oil and Gas Company Should You Buy?

Referring to Table 1 further down the page, Suncor Energy’s D/E increased 7% while its operating cash flow dropped by only 15%. Compared to its peers, it’s doing quite well. At the same time, its operating margin remains the highest among its peers.

It’s more reassuring to hold Suncor shares because it has a track record of increasing dividends. It has hiked dividends for 13 consecutive years. Further digging, and it turns out Suncor Energy is keeping operating cost low.In the first half of 2015, its operating cost per barrel was only $28.20. The oil price has remained above that, so that’s how the company remains profitable in this low oil price environment. Suncor Energy’s 5-year compounded annual growth rate for its dividend is over 20%, although its most recent dividend increase was only 3.6% to reflect the impact of the low oil price.

Imperial Oil is also a possible Canadian energy stock to buy as it maintains a relatively high operating margin of 10.5%. Coincidentally, that percentage is close to its 2009 low levels of 10.3%. Imperial Oil has impressively increased dividends for 20 years, although its dividend growth rate has been around 6% per year. Even though it only yields 1.3%, after a pullback of over 23% from its 52-week high, it could still be a decent investment. Investors can view Imperial Oil as a very conservative energy stock. It is awarded the highest S&P credit rating of AAA.

The operating margins of both Husky and Cenovus has dropped to below 4%. Particularly, Cenovus’ D/E is much higher than the others. Cenovus slashed its dividend in September 2015 by 40%. It probably did it to maintain a strong balance sheet, but it was bad news to income investors.

So, if I were to buy only one integrated oil and gas company, I would probably go with Suncor Energy, although Imperial Oil is not a bad choice if you’re a conservative investor.

Winner: Suncor Energy (or Imperial Oil for the more conservative investors)

Integrated Oil and Gas Stocks: Profitability and Debt Comparison

Company 1Market Cap 1Yield S&P Credit Ratings 2EPS change 2Op CFL change 2TTM Op Margin 3D/E Change 4D/E
Suncor $49.2B 3.4% A- -47.8% -15% 13.1% +6.7% 0.32
Imperial Oil $35.6B 1.3% AAA -43.1% -32.4% 10.5% +18.2% 0.26
Husky $20.9B 5.7% BBB+ -76.7% -12.8% 1.7% +22.7% 0.27
Cenovus $17B 3.1% BBB+ -186.7% -27.1% 3.5% -1.9% 0.53

Table 1: Integrated Oil and Gas Stocks Profitability and Debt Comparison
1 As of close of September 18, 2015
2 EPS change, Operating Cash Flow change, and Debt-to-Equity Change derived from Morningstar data on close of September 18, 2015
3 Latest quarter D/E compared to 2014’s
4 Latest quarter D/E

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