Pembina Pipelines Corp.

On my other blog I am today writing about possible cheap dividend stocks for May 2015 continue...

Sound bite for Twitter and StockTwits is: Dividend Growth Utility stock. I am in this stock for the long term, but they do seem to have some trouble with earnings. It just raised their dividend again. They do have cash flow to cover this. See my spreadsheet at ppl.htm.

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 purchased this stock it was an Income Trust company.

This company converted from an income trust to a corporation in 2010. When it converted it kept its dividend level. They increased the dividends in 2012 modest amounts (that is under2%). The dividend increase was 3.7% in 2013 and 3.6% in 2014.

They are still paying out more in dividends that they are earning but they have the dividend to cash flow ratio under control. In 2014 the Dividend Payout Ratio for EPS is 161% and for CFPS was 60%. They had a tax pool that would allow them not to be taxes between conversion and now.

This stock used to have a very high dividend yield. The historical high is over 15%. When income trusts became corporations it was felt that dividend yields, because of dividend cuts and stock price increases would end up in the 4 to 5% dividend yield range. Currently this stock has a dividend yield of 4.08% and this is because of the rise in the stock price.

I made my initial purchase in this stock just over 13 years ago. I have received some $17.33 per share in dividends and my stock cost basis is $11.50. This is the reason to investing in dividend growth stock. My return is very good with an 18.38% per year total return. The portion attributable to capital gain is 10.57% per year. The portion attributable to dividends is 7.81% per year.

I expect both the capital gains and dividends to be lower in the future. The run up in stock price for this company as a result of the switch to a corporation is over. Dividend yields have also moderated from a median of around 8.9% to one of just over 5% and current dividend is just over 4%.

Shares have grown at 16% and 13% per year over the past 5 and 10 years. Shares have grown due to Shares Issues, Stock Options, DRIP and Debenture Conversions. So as a shareholder I am most interested in per share values.

There has been good growth in Revenue, Adjusted Funds from Operations (AFFO), Funds from Operations (FFO) and Cash Flow. The problem is growth in earnings and this has been non-existent to moderate.

Revenue has grown at 50% and 36% per year over the past 5 and 10 years. Revenue per Share has grown at 29% and 21% per year over the past 5 and 10 years. The 5 year growth in AFFO is at 8.6% per year and for FFO is at 10.6% and 8.6% per year over the past 5 and 10 years.

Cash Flow has grown at 33% and 24% per year over the past 5 and 10 years. CFPS has grown at 14.7% and 10.5% per year over the past 5 and 10 years.

The growth in Net Income is good at 19% and 20% per year over the past 5 and 10 years. However, EPS has had no growth over the past 5 and has grown at 5.9% per year over the past 10 years. In 2014, EPS was down some 5.4% at $1.06. For 2015 EPS is expected to be $1.15, an 8.5% increase. I note that the first quarterly dividend came in under the estimate.

I have Return on Equity Ratios over the past 18 years. Of these years, 13 or 72% of these years had ROE of less than 10%. The last time the ROE was over 10% was in 2011. For 2014 the ROE is 6% and the 5 year median value is 6.8%. The ROE on comprehensive income is lower at 5.9% but the 5 year median is a bit better at 7.1%.

The debt ratios are mostly good. The Liquidity Ratio for 2014 was at 0.98, but if you add in dividends less cash flow the value is 1.29. The Debt Ratios for 2014 are 2.29 a very good ratio. Leverage and Debt/Equity Ratios for 2014 are 1.78 and 0.78, which are also good ratios.

This is the first of two parts. The second part will be posted on Thursday, May 07, 2015 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.

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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