Monday, July 11, 2016

Inter Pipeline Ltd

Sound bite for Twitter and StockTwits is: Price reasonable to expensive. However, stock is cheaper than it was in 2014. Good dividend and decent increases. Shareholders have done well. See my spreadsheet on Inter Pipeline Ltd.

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.

I noted that for the 2015 financial year there was a big rise in dividends paid in cash. The reason is a big drop in DRIP dividends. In August 2015 Inter Pipeline Ltd stopped giving a premium reinvestment discount on DRIPs.

The dividend is good and the dividend increases are moderate. The current dividend yield is 5.66% based on dividends of $1.56 and a stock price of $27.56. It has a 5 year median dividend yield is 5.07% and its historical dividend yield is 8.89%. This stock was a limited partnership until it became a corporation in 2013. The dividends growth has been 10.42% and 7.02% per year over the past 5 and 10 years. Dividends are paid monthly.

The Dividend Payout Ratios for this company are high. The DPR for EPS for 2015 was 115%. Analysts expect it to be around 101% by 2018. The DPR for EPS has almost always been above 100%. The DPR for CFPS has been better. The DPR for CFPS was 64% in 2015. The 5 year median DPR for CFPS is 69%.

The stock has also provided shareholders with good total returns. The total return over the past 5 and 10 years is 14.08% and 19.12% per year. The portion of this return attributable to dividends is at 5.93% and 7.35% per year over the past 5 and 10 years. The portion of this return to capital gains is at 8.15% and 11.79% per year over the past 5 and 10 years.

The Liquidity Ratios are very low at first glance with a value of 0.15 for 2015. A proper ratio should be around 1.50 or higher. However, part of the reason is outstanding commercial papers listed as current liabilities. However, excluding commercial paper value the ratio is only 0.76. If you add in cash flow after dividends you get a ratio of 1.57. The problem is that this gives the company vulnerabilities in bad economic times. The Debt Ratio is fine at 1.54. The Leverage and Debt/Equity Ratio at 2.86 and 1.86 are rather normal for a pipeline.

The Return on Equity has been below 10% 2 times in the past 5 years and 4 times during the past 10 years. I prefer it not to be below 10% in any year. The ROE for 2015 was 13.5% and the 5 year median ROE is also 13.5%.

The other thing to mention is that outstanding shares have grown at 5.5% and 6.2% per year over the past 5 and 10 years. Therefore I would, if I was invested in the stock look at the per share values to get a proper idea of actual growth. This can make a difference. For example Revenue growth looks good at 11% and 6.1% per year over the past 5 and 10 years. However, the real growth is shown in Revenue per Share where growth is at 5.2% and 0% over the past 5 and 10 years.

Over the past 5 and 10 years earnings and cash flow growth is better. The EPS growth over the past 5 and 10 years is at 7.1% and 10.3% per year. The CFPS growth over the past 5 and 10 years is at 12.2% and 10.8% per year.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.21, 18.16 and 21.18. The 10 year corresponding values are lower at 12.03, 14.29 and 16.76. The historical ratios are similar at 15.13, 17.86 and 19.92. The current P/E Ratio is 20.88 based on a stock price of $27.56 and 2016 EPS estimate of $1.32. This stock price testing suggests that the stock price is relatively high.

I get a Graham Price of $15.59. The 10 year low, median and high median Price/Graham Price Ratios are 1.18, 1.41 and 1.62. The current P/GP Ratio is 1.77 based on a stock price of $27.56. This stock price testing suggests that the stock price is relatively expensive

I get a 10 year median Price/Book Value per Share Ratio of 2.81. The current P/B Ratio is 3.37 a value 20% higher. The current P/B Ratio is based on a stock price of $27.56 and BVPS of $8.18. This stock price testing suggests that the stock price is relatively expensive

With dividend yield testing, the current dividend yield is 5.66% and the 5 year median dividend yield is 12% lower at 5.07%. This tells you that the current price is better than the median price over the past 5 years. However, the historical dividend yield is a lot higher at 8.07%. But, as a Limited Partnership you would expect rather high dividend yields. This company changed from a Limited Partnership in 2013.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold and so the consensus recommendation is a Hold. The 12 month stock price if $27.54. This implies a total return of 5.59% with 5.66% from dividends and a capital loss of 0.07%.

Andrew Walker of Motley Fool likes this stock and thinks that the company will raise the dividends a second time this year. Lee Rogers on Press Telegraph talks about recent analysts ratings saying 4 rate it a Buy, 7 a Hold and 0 a Sell meaning analysts are 36% positive on this stock. See what analysts are saying about this stock on Stock Chase. In July of 2015 the blogger Road Map 2 Retire talks about why he bought this company.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

The last stock I wrote about was about was Morneau Shepell Inc. (TSX-MSI, OTC-MSIXF)... learn more . The next stock I will write about will be TMX Group Ltd (TSX-X, OTC-TMXXF)... learn more on Wednesday, July 13, 2016 around 5 pm. Tomorrow on my other blog I have some notes on my updating of my stock list... learn more on Tuesday, July 12, 2016 around 5 pm.

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 Ltd.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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