Get a 5% yield from Pembina Pipeline Corp. active on both sides of the border

The company’s revenue is up 7.1% and cash flow up 9.1% as new pipelines and other projects begin operating.

The firm is still developing new projects and upgrades to add further expand its network.

The stock trades at just 10.9 times the company’s 2019 cash flow forecast while yielding 5% following a recent 5.3% dividend hike.


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PEMBINA PIPELINE (Toronto symbol PPL; www.pembina.com) owns pipelines that carry almost all of B.C.’s oil and half of Alberta’s conventional oil. In addition, its network transports 30% of Western Canada’s natural gas liquids (NGLs). The company owns extensive facilities to extract, process and store NGLs; it also operates natural gas-processing plants.

In the quarter ended March 31, 2019, Pembina’s revenue rose 7.1%, to $1.97 billion from $1.84 billion a year earlier. Overall cash flow gained 9.1%, to $578.0 million from $530.0 million. Due to more shares outstanding, cash flow per share improved 8.6%, to $1.14 from $1.05. Those gains are mainly due to new pipelines and other projects that began operating in 2018.

Pembina now plans to slow the development of its proposed Jordan Cove liquefied gas facility and related pipelines in Oregon. That’s because both state and federal regulators are still examining the project. As a result, the company now expects to complete Jordan Cove in 2025 instead of 2024. Pembina also plans to sell between 40% and 60% of the project to help offset its $7.5 billion cost.

Dividend Stocks: Company plans to spend $1.6 billion in 2019

In 2017, Pembina completed its acquisition of Veresen Inc. for $9.7 billion. The firm’s holdings broadened Pembina’s operations as well as its U.S. exposure. In addition, Veresen came with key assets, including 50% of the Alliance gas line. It spans the 3,000 kilometres between Chicago and Fort St. John, B.C.

Pembina now plans to spend $1.6 billion on new projects and upgrades to its existing operations in 2019.

About 53% of that spending will go toward new pipelines. That includes completing two expansions of its Peace Pipeline System. A further 25% will go to Pembina’s facilities division. It is now building gas-processing plants, which should begin operating in the next two years. The remaining 22% will go toward other projects such as the proposed Jordan Cove liquefied gas facility and related pipelines in Oregon. That project could begin operating in 2024.

The stock trades at just 10.9 times forecast 2019 cash flow of $4.42 a share. The company raised its dividend by 5.3% with the June 2019 payment. The shares now yield a high 5.0%.

Recommendation in Canadian Wealth Advisor: Pembina Pipeline Corp is a buy.

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