Gordon Pape's Winners... Pembina Pipeline Corp.
- Ticker:
- Type: Common stock
- Current price: $50.76
- Originally recommended: June 23/09 at $14.78
- Annual payout: $2.78
- Yield: 5.5 per cent
- Risk rating: Moderate
Comments: Pembina has been a steady profit producer for us ever since it was recommended in 2009. The share price is up 11.27 per cent so far this year, and, as a plus, we have received a dividend increase.
The Calgary-based company owns pipelines that transport hydrocarbon liquids and natural gas products produced primarily in Western Canada. It also owns gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business.
The company reported a solid first quarter. For the three months ended March 31, revenue was $1.54-billion, down slightly from $1.62-billion in the same period of 2023. However, profits were up, with net income of $438-million (73 cents per diluted share), compared with $369-million (61 cents a share) in last year’s first quarter.
Quarterly adjusted EBITDA set a record at $1.044-billion, up from $947-million the year before. The company attributed the improvement to higher revenues and profits on the Peace Pipeline system, the reactivation of the Nipisi Pipeline and a higher contribution from Alliance Pipeline related to higher tolls on seasonal contracts.
Pipeline volumes of 2,598 mboe/d in the first quarter represented a 5-per-cent increase year-over-year.
On April 1, the company announced the completion of the Alliance/Aux Sable acquisition. It aligns with Pembina’s strategy by growing and strengthening its existing franchise and providing greater exposure to resilient end-use markets and lighter hydrocarbons.
In conjunction with the acquisition closing, Pembina updated its 2024 adjusted EBITDA guidance range to $4.05-$4.3-billion (previously $3.725-$4.025-billion). Relative to the previous guidance range, the revised outlook for 2024 primarily reflects the incremental contribution from increased ownership of Alliance and Aux Sable, as well as a stronger outlook in the marketing business.
Pembina’s board of directors raised the common share cash dividend to 69 cents per share, an increase of 3.4 per cent. The latest payment was June 28.
Action now: Despite the price increase, the yield is still attractive, and business is thriving. Buy.