Pembina Pipeline and Veresen both trade at high multiples to their per-share cash flow. But both of these dividend stocks also currently maintain high yields.
PEMBINA PIPELINE (Toronto symbol PPL; www.pembina.com) owns pipelines that carry half of Alberta’s conventional oil, 30% of Western Canada’s natural gas liquids (NGLs) and almost all of B.C.’s conventional oil.
Pembina bought rival Provident Energy for $3.2 billion in 2012. Provident extracts, transports and stores natural gas liquids (NGLs).
This acquisition is now paying off: in the quarter ended March 31, 2014, Pembina’s cash flow rose 30.6%, to $264.0 million from $202.0 million a year earlier. Cash flow per share gained 22.1%, to $0.83 from $0.68, on more shares outstanding. Pipeline expansions and strong profit margins at Provident were the main reasons for the gains.
Pembina plans $1.5 billion of capital spending in 2014, up 56% from 2013. It will invest 60% of these funds in NGL-related projects and the other 40% in oil-pipeline expansions.
The company has just raised its monthly dividend by 3.6%, to $0.145 from $0.14. The shares now yield 3.8%.
Veresen pursues plan to ship gas to Oregon for export to Asia
VERESEN (Toronto symbol VSN; www.vereseninc.com) owns pipelines, power plants and gas-processing facilities across North America.
A major holding is 50% of the Alliance gas line, which runs 3,000 kilometres between Chicago and Fort St. John, B.C. Veresen also owns the Alberta Ethane Gathering System, 42.7% of the Aux Sable NGL plant, and the Hythe/Steeprock natural gas gathering and processing complex in the Cutbank Ridge region of Alberta and B.C.
To diversify its operations, the company is expanding into power generation, including hydroelectric facilities, wind farms and natural gas-fired plants.
Veresen continues to move ahead with its plan to ship gas from Canada to its proposed $6.8-billion Jordan Cove liquefied natural gas plant in Oregon for export to Asia. If regulators give final approval, the project could start up in 2019.
In the quarter ended March 31, 2014, Veresen’s cash flow per share rose 22.2%, to $0.33 from $0.27. The stock yields a high 5.4%.
In the latest issue of Canadian Wealth Advisor, we consider Pembina’s cash flow forecast in light of its huge increase in capital spending. We also look at Veresen’s outlook, including its projected cash flow for 2014 and whether it can maintain its high dividend. We conclude with our clear buy-hold-sell advice on these two stocks.
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Pembina Pipeline and Veresen both trade at high multiples to their per-share cash flow. But both of these dividend stocks also currently maintain high yields.
