Don’t be put off by Pembina’s high yield

Article Excerpt

We often remind our readers that a high dividend yield is a good indicator that investors expect a dividend cut. As a result of the sharp drop in crude oil prices, Pembina’s shares have fallen and its yield jumped to 7.2%. However, the dividend looks safe as the company gets most of its cash flow from secured, fixed-price contracts unrelated to oil prices or volumes. PEMBINA PIPELINE CORP. $36 is a buy. The company (Toronto symbol PPL; High-Growth Dividend Payer Portfolio; Utilities sector; Shares outstanding: 549.8 million; Market cap: $19.8 billion; Dividend yield: 7.0%; Dividend Sustainability Rating: Above Average; operates pipelines that carry almost all of B.C.’s oil and half of Alberta’s conventional oil. Investors also gain exposure to its facilities extracting, processing and storing natural gas. Pembina last increased its monthly dividend by 5.0% with the January 2020 payment, to $0.21 a share from $0.20. The new annual rate of $2.52 yields a high 7.0%. The company pays out around 60% of its cash flow…

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