TFSA Investors: Time to Buy Pembina Pipeline Corp. (TSX:PPL)?

Pembina Pipeline Corp. (TSX:PPL)(NYSE:PBA) just hit a new 52-week high. Are more gains on the way?

| More on:
The Motley Fool

Pembina Pipeline Corp. (TSX:PPL)(NYSE:PBA) is on a roll after its Veresen acquisition.

Let’s take a look at the Calgary-based energy company to see if it deserves to be in your portfolio today.

Assets

Pembina is an integrated transportation and midstream service provider primarily operating in western Canada.

The attraction for investors is the diverse asset base all along the hydrocarbon value chain, including pipelines, gas gathering and procession facilities, and an oil and natural gas liquids (NGL) infrastructure and logistics group. The different segments enable Pembina to secure contracts on a full range of midstream and marketing services.

Growth

Pembina is moving ahead with a number of growth initiatives, including its $280 million Phase VI Peace Pipeline expansion, which could be in operation in early 2020.

Phase IV and Phase V are underway and scheduled for completion later this year.

Pembina is also evaluating a $2 billion ($1 billion net to Pembina) capital investment in its 50%-owned Alliance Pipeline system. Pending approvals, the project could be in service by the end of 2021.

On the facilities side, Pembina is spending $120 million to expand capacity at its Empress extraction plant. That project should begin generating revenue by the end of 2020. In addition, Pembina is making progress on a number of other developments, including an ethane storage facility, a liquefied petroleum gas (LPG) export terminal in British Columbia, and the Duvernay II gas processing project. All three should be completed through mid 2020.

The company’s marketing and new ventures group is also working on some interesting projects, including the proposed LNG export terminal in Oregon and related pipeline infrastructure.

Earnings

Pembina reported record Q1 2018 results. Earnings came in at $330 million, representing a 57% increase. On a per-share basis, adjusted cash flow from operating activities rose 36% compared to Q1 2017.

In a late-May update, Pembina upgraded its 2018 EBITDA guidance range by $100 million. The company now anticipates 2018 EBITDA to come in at $2.65-2.75 billion.

Dividends

Pembina just raised its monthly dividend by 5.6% from $0.17 to $0.18 per share. That’s good for an annualized yield of 4.9%.

Should you buy?

Pembina’s stock has bounced around in the past year, but it has picked up a nice tailwind since early April, moving from $38.50 to above $46.50 per share, hitting a new 12-month high.

The company appears to be firing on all cylinders, and investors should continue to see steady dividend growth as the development projects shift to operation in the coming years.

If you are looking for a solid dividend pick for your income portfolio, with a shot at some nice upside in the stock price, Pembina deserves to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned. Pembina is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

open vault at bank
Dividend Stocks

Don’t Get Cute; Just Buy Stability: Top Defensive TSX Stocks to Buy Now

A healthy risk tolerance is essential for most investors, but many stray from the tried and tested, hoping to find…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

TFSA Investors: Buy These 3 Stocks for $3,480 Yearly Tax-Free Income

One significant benefit of a TFSA-based dividend income is that it doesn’t weigh down your tax bill.

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

A meter measures energy use.
Dividend Stocks

Is Fortis Stock a Buy, Sell, or Hold for 2025?

Fortis has increased its dividend annually for the past five decades.

Read more »

analyze data
Dividend Stocks

3 Dividend Stocks That Are Screaming Buys in November

Here are three top dividend stocks long-term investors won't want to ignore during this part of the market cycle.

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Generate $175/Month in Passive Income With a $30,000 Investment

Dividend aristocrats offer reliability, and many of them also offer generous yields. With sizable enough discounts, these yields can become…

Read more »

dividends can compound over time
Dividend Stocks

Best Dividend Stocks to Buy Now for Canadian Investors

These three stocks would be excellent additions to your portfolios, given their solid underlying businesses, consistent dividend growth, and healthy…

Read more »