RE:Where's The Dividend Increase ???Although I am a bit grumpy about the lack of dividend increases too, I have been patient while KAPS has been under construction, and even added a few more shares to my holdings (which still exceed the sum total of the shares held by their Board, excluding Dean and Jim). However, I think that now they absolutely have to deliver given the imminent completion of KAPS and what they have suggested to the market. The increase needs to be significant too, given the magnitude of incremental DCF from KAPS and the fact that several of their peers have made multiple increases over the past 3.5 years. I would like to see a minimum of 15% but would certainly be happy to see them exceed my expectations. For the record, extending its 7% dividend CAGR for the past 3.5 years would imply that an immediate dividend increase of 26.7% is due, just to stay on track.
Furthermore, beyond an immediate dividend increase, I think that Keyera needs to more clearly commit to future increases. Given the market's focus on inflation, I think that committing to increasing distributions as a hedge is an important message to investors, since many are retired and are losing purchasing power every year in real terms. Keyera's presentation refers to 7% dividend growth historically, and future dividend increases in line with DCF growth (8% historically). With a 60% payout ratio, that would imply around 5%. But unless they actually commit something like 5-7% annually going forward, then I think they are being misleading on what the business is able to deliver, because safe harbour BS aside, that is what they are suggesting.
Anything less than both will be a disappointment in my mind and a disservice to shareholders, as I think the combination of both messages would lead to the highest share price (10-15% immediate bump depending on the strength of this message). The next couple of earnings calls will prove to me whether the CEO and Board are tone deaf to the market or not. I have wondered about this for a while now. I don't want to hear about a bunch of tuck-in expansion potential. Don't care. Just show me the money.
Also, on that note, I've got to think that Keyera is minting money right now on marketed volumes given the expansion in the spread between oil and nat gas prices (which is around 23x based on Friday's closing prices for near-month WTI and NYMEX futures, and likely more based on Cdn prices). I was disappointed to see the price that Pembina/KKR got on their 50% share in KAPS, and had assumed that it was due to a lack of undelying contracting strength (vs a control discount), but if that is in fact the case then, as luck would have it, it means that they will make a lot more on marketed volumes and can lock in better terms on uncontracted volumes, since I have to think that every producer with raw gas is going to be keen to pull every drop of liquids out that they possibly can...