High-yielding pipelines with gains ahead

Article Excerpt

Pembina Pipeline and Veresen both trade at high multiples to their per-share cash flow. But both have strong growth prospects and high dividend yields. We think they have further gains ahead. PEMBINA PIPELINE $44.90 (Toronto symbol PPL; Shares outstanding: 323.0 million; Market cap: $14.5 billion; TSINetwork Rating: Average; Dividend yield: 3.9%; 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…