Pembina Pipelines Corp.

On my other blog I am today talking about some good stock from my portfolio continue...

I own this stock of Pembina Pipelines Corp. (TSX-PPL, NYSE-PBA). In Dec 2001 I thought it would be a good time to purchase this stock as the market was relatively low. Pipeline stocks are conservative and the return on this one was good at 9.7%. When I purchases this stock it was an Income Trust company.

As an income trust this company had increased their dividend, but not consistently. When it changed to a corporation, it basically kept its dividend level for three years. Since then there has been modest dividend increases. The most recent one was in 2013 and the increase was at 3.7%.

This company has the dividend growth characteristic of good dividends and low dividend growth. The current dividend is at 3.91%. The 5 year median dividend yield was higher at 5.98%. However, dividend yields tended to be higher on income trust companies than corporations. I would expect that dividends to be around 4% going forward.

This company still has not got the Dividend Payout Ratio for EPS under control. The 5 year median DPR for EPS is at 148%. The DPR for EPS for 2013 is at 146% and it is expected to be around 132% for 2014. The DPR for CFPS is better with the one for 2013 at 71%. The DPR for CFPS is expected to be around 75% in 2014.

I have done very well in this stock with a total return of 19.54% per year. The portion of this return attributable to capital gains is at 11.98% per year and to dividend is at 7.56% per year. The 5 and 10 year total return on this stock is at 26.34% and 18.81% per year. The portion of this return attributable to dividends over these periods is at 6.70% and 6.67% per year. The portion of this return attributable to capital gains is at 19.64% and 12.15% per year over these periods.

However, I think that the easy money has been made on this stock. Although I expect growth in the future, I expect that it will not be a good as it was in the past. When companies went from income trusts to corporations, the stock prices generally climbed because dividend yields were expected to be lower for corporations. Dividend yields going forward will also not be a good as in the past.

The outstanding shares have increased by 18.5% and 12.3% per year over the past 5 and 10 years. Shares have increased due to Stock Issues, Stock Options, DRIP and Debenture Conversion. Because shares have increased, the "per Share" values become quite important. Revenues, Net Income and Cash Flow have all increased much more than Revenue per Share, EPS and CFPS.

Revenues have increased by 49.4% and 35.4% per year over the past 5 and 10 years. Revenue per Share has increased by 26.1% and 20.6% per year over the past 5 and 10 years.

Net Income has increased by 6.8% and 16.7% per year over the past 5 and 10 years. However EPS is down by 1.2% and up by 6 8.4% per year over the past 5 and 10 years. If you look at the 5 year running averages for EPS, EPS is up by 4.2% and 6.8% per year over the past 5 and 10 years. This is because exactly 5 years ago was a good year for earnings.

Cash Flow is up by 28.3% and 22.4% per year over the past 5 and 10 years. CFPS is up by 8.3% and 9% per year over the past 5 and 10 years. If you look at the 5 year running averages for CFPS, the increase is not quite so good coming in at 6.8% and 5.3% per year over the past 5 and 10 years.

The Return on Equity has been quite low over the last couple of years with ROE at just 4.4% in 2013. However, the 5 year median ROE is much better at 14.4%. The ROE for comprehensive income is better in 2013 than for net income and it at 7.1%. This is still low, but it is better than 4.4%.

The Liquidity Ratios are not great. For 2013 the ratio is 0.84. This means that current assets cannot cover the current liabilities. However, if you consider cash flow the ratio is just 1.01. This means that current assets just cover current liabilities. Utilities generally count on cash flow to cover current liabilities.

The Debt Ratio is very good at 2.30. The Leverage and Debt/Equity Ratios are quite good at 1.77 and 0.77.

This has been a good stock for me. I would like it to get its Dividend Payout Ratio for EPS at a better place. Most analysts reviewing this still look at Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) to determine if the payout in dividends are reasonable or not. I expect to continue to do well with this stock, but I am also keeping an eye on it. See my spreadsheet at ppl.htm.

This is the first of two parts. The second part will be posted on Thursday, May 1, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Pembina transports crude oil and natural gas liquids produced in Western Canada. It owns and operates oil sands pipelines and has a growing presence in midstream and natural gas services sectors. Pembina holds a 50% interest in the Fort Saskatchewan Ethylene Storage Facility. Its web site is here Pembina Pipelines.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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