Monday, July 28, 2014

Inter Pipeline Ltd.

On my other blog I am talking about negative investment reports continue...

I do not own this stock of Inter Pipeline Ltd. (TSX-IPL, OTC-IPPLF). In 2008, a friend had asked me about this pipeline and I had no information on it, so I investigated it. It is a utility and I follow and have lots of utility stocks.

This is a dividend growth stock with a good dividend and moderate growth. The current dividend is 3.73% and the 5 year median dividend is 5.75%. The 5 and 10 year dividend growth is at 6.6% and 4.8% per year. The last dividend increase occurred in 2013 and was for 13%. Dividend increases have been good lately, but there were no increases in 2008 and 2009.

The 5 year median Dividend Payout Ratio for EPS is 98%. There is a problem in that in 2013 there was an earnings loss. The DPR for 2014 is expected to be 110% and then decrease from there. The 5 year median DPR for CFPS is 70%. The DPR for CFPS for 2013 was 75%. In 2014 the DPR for CFPS is expected to be 79% and then start to decrease.

Shareholders have been making money from this stock recently with the 5 and 10 year total return at 32.60% and 20.14% per year. The portion of this return attributable to dividends is at 6.38% and 5.92% per year over these periods. The portion of this return attributable to capital gains is at 26.21% and 14.22% per year over these periods.

Outstanding shares have increase by 6.6% and 9.01% per year over the past 5 and 10 years. The increases are due to DRIP, Stock Options and Share Issues. They also issued more shares in 2014 and this year so far they have increased the shares by another 4.4%. Because of the increasing shares, the values per shares become much more important.

Revenue, Earnings and Cash Flow growth is much better over the past 10 years than over the past 5 years. It is only Revenue per Share that shows negative growth over the past 5 years. Revenue is up by 22.6% and 2.2% per year over the past 5 and 10 years. Revenue per Share is down by 4.2% and up by 12.4% per year over the past 5 and 10 years. The company did suffer in the 2008 recession, but growth has been uneven since then.

Since there was an earnings loss in 2013, I will look at the 5 year running averages for EPS. Over the past 5 and 10 years EPS is up by 7.8% and 18.6% per year. EPS took a hit in 2008 also and until this year they have been growing. The earnings loss for 2013 was due to the company's reorganization and so is not serious.

Cash Flow has done the best and Cash Flow is up by 11% and 18.2% per year over the past 5 and 10 years. CFPS is up by 4.2% and 8.4% per year over the past 5 and 10 years.

The Return on Equity was below 10% 4 times in the past 10 years. In two of these years, 2007 and 2013 it was because earnings were negative. Prior to 10 years ago, ROE was very low. The 5 year median ROE was just 1.6%. The ROE on comprehensive income for 2013 was very low at just 1.3%.

The debt ratios are not very good. The Liquidity Ratio for 2013 is 0.15. It has to be at 1.00 before current assets can cover current liabilities. Part of this, but a very small part is the current portion of the long term debt. Another small part is outstanding current commercial papers. However, when you add that back in the Liquidity Ratio is 0.52. If you add in cash flow after dividends, it only rises to 0.72.

The Debt Ratio is a bit low at 1.45 and the Leverage and Debt/Equity Ratios are a bit high at 3.21 and 2.21 for 2013.

Sound bit for Twitter and StockTwits is: Dividend Growth Stock. The biggest current liabilities have to do with decommissioning obligations, environment liabilities and construction reclamation. Personally, I would want them to get their Liquidity Ratio under control before I would want to invest in this stock. See my spreadsheet at ipl.htm.

This is the first of two parts. The second part will be posted on Tuesday, July 29, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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. The company is a limited partnership, not an income trust. Its web site is here Inter Pipeline.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

  1. Ipl has been one of my best investments in over 30 years of investing. What I mean as best is a combination of capital gains and dividends. Not an apple blockbuster but a company that allows me to sleep at night.
    Love you blog keep it up