Friday, December 24, 2010

Inter Pipeline Fund 2

This is a stock (TSX- IPL.UN) that I follow, but I do not own. This company is a limited partnership and they do not plan to convert to a corporation. However, they will become a taxable entity after January 2011. Their distributions will also become dividends and they will qualify for the dividend tax credit.

When I looked at the Insider Trading report, there was no action. Probably, this is because insiders do not seem to have any units. They have Deferred Unit rights, as part of their compensation. The insiders seem to be selling these off. The company has just raised their dividends by 6.6%, so this shows some confidence in the company.

From the spreadsheet, I see that the current Price/Earnings Ratio is 16.8. The 5 year median low P/E Ratio is 10 and the 5 year median high P/E Ratio is 16. A P/E Ratio of 16 is not particularly high, but it seems to be relatively high for this stock. I get a current Graham Price of $10.38 and a stock price of $15.27. The stock price is 47% higher than the Graham Price. The high percentage difference between the stock price and the Graham Price over the past 10 years is 22%. So, again, on a relative basis, the stock price is high. It is also way about the Graham price.

In looking at the Price/Book Value Ratio, I get a current one of 2.90 and a 10 year average of 1.43. The current one is more than 2 times the 10 year average. I get a current yield of 6.3% and a 5 year average yield of 9%. By these two ratios, it would seem like the current stock price is high.

When I look at the analysts’ recommendations, I see Strong Buy, Buy, Hold and Sell recommendations. I see no Underperform recommendations. Most of the recommendations are Buy and Hold. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.)

The analysts with the Hold recommendations give a 12 month stock price that is less than the current price. Most are around $14.00. Analysts’ like the company’s management and many think it is a good long term investment. A lot of analysts have been warning that income trust company’s dividend yield’s will come down because price will move up to put the yields closer to 4%.

Inter Pipeline is a major petroleum transportation, natural gas liquids extraction, and bulk liquid storage business based in Calgary, Alberta, Canada. Structured as a publicly traded limited partnership, Inter Pipeline owns and operates energy infrastructure assets in western Canada, the United Kingdom, Germany and Ireland. Its web site is here Inter Pipeline. See my spreadsheet at ipl.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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