October 1, 2014

Versen Inc (VSN)

Versen Inc (VSN) is an income trust that was incorporated when the tax rules shifted at the beginning of 2011.  For those of you that are not familiar with difference in corporate structure, basically, as an income trust in Canada companies were allowed to pay out dividends to their shareholders and circumvent a lot of taxes.  These tax advantages allowed for incredible yields in the double digits.  The Canadian government realized that it was losing a substantial amount of tax revenue as more and more companies began using this income trust structure and closed the option in January, 2011.  The only exception to this rule is Real Estate Investment Trusts (REITs) will still exist in Canada (they were allowed to keep the tax-advantages to encourage new building developments).  This was not the only change for the stock in 2011.  The Calgary-based company was formerly known as the Fort Chicago Energy Partners (FCE.UN-T) and obviously changed their name to Veresen when they entered their new corporate re-structuring.  Apparently the name is a derivative of the Latin phrase “vis vires” and then english “energy” which loosely translated means “with power, force, strength, energy.”

 

Veresen (VSN) is an energy infrastructure company that primarily relies on taking energy from Canada and transporting it to the USA.  They have three primary divisions of business – power generation, natural gas liquids, and pipeline transportation.  This diversification of energy assets give Veresen a strong stability factor that not all energy plays enjoy.  The pipeline segment is the major money-maker for Veresen (VSN) and consists of two major pipeline systems.  The Alliance pipeline is 3,000km of pipe that transports natural gas to the Midwestern USA from Western Canada.  The other pipeline is the Alberta Ethane Gather System, which helps spur Alberta’s petrochemical businesses.  Veresen’s power generation operation has been branching into areas of “greener” energy and they believe that this innovative area will be integral to their long term growth.  They also cite acquisition activity as a large part of their long-term game plan.  Their lengthy contracts in a variety of areas add to the company’s allure as a stable, profitable, dividend player.

 

While many people were concerned about what affect the new taxation rules would have on former income trusts, Veresen (VSN) has done very well since its incorporation.  The tax structure of the company does not change the fundamentals of energy supply and demand, or the company’s solid underlying assets.  Because of this reality Veresen has been able to maintain a solid dividend yield of about 7.5% while trading around $13 per share.  This yield is high despite the relatively expensive price-to-earnings ratio of 25.  This shows just how much faith the markets have in the energy transportation giant, and the future of the industry.  Dividend investors should note that Versen (VSN) offers a great Dividend Re-Investment Plan (DRIP).  If you choose to automatically re-invest your substantial dividends into more Veresen stock, you will automatically receive a 5% discount on the stock price.  This is an immediate return on your investment, and a perfect way to easily dollar cost average over a long period of time.

 

Versen Inc (VSN) Dividend Stock Graph:

TSE VSN

Versen Inc (VSN) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
VSNVeresen Inc13.77.3182.040.961.020.00

TransCanada Corp (TRP)

TransCanada Corp (TRP) is one of the largest and most well-established energy infrastructure companies in the world.  With more than 60 years of experience within the industry, the company boasts operations in natural gas, oil pipelines, power generation, and gasoline storage facilities across Canada and the United Sates.  TransCanada’s network of natural gas pipelines consists of over 57,000 kilometres (35,500 miles) and has a supply point at pretty much every major natural gas source in North America.  The company also owns enough storage capacity to safely house 380 billion cubic feet of natural gas.  Although TransCanada Corp (TRP) is not known for its independent power production, it now has ownership shares in companies that produce almost 11,000 megawatts of power in Canada and the USA.  Their Mainline pipeline is the largest in North America and runs underground across Canada.  For over 50 years TransCanada has been responsible for transporting oil and gas from the energy-rich part of the country, across the prairies, to the more heavily industrialized Eastern coasts.

 

TransCanadaThe newest development for TransCanada Corp (TRP) is the mega-sized project that would see crude oil pumped from Saskatchewan and Alberta down through the USA heartland.  With its oil sand production Canada has emerged as the USA’s biggest supplier of oil by far, and TransCanada is looking to cash in on the nervousness that the US government has about relying on oil from Venezuela and the middle-east.  The massive new pipeline that has been proposed is called the “Keystone XL” line and is purported to be engineered to pump over one million barrels of oil per day.  As oil prices climb in the coming decade this pipeline could be a boon for the Canadian economy and TransCanada Corp (TRP) shareholders, as we well as a necessary expense for the oil-started American economy.  That being said, I would definitely recommend paying attention to recent developments where Keystone XL is concerned as many environmentalist lobby groups in the USA are pulling out all the stops to try and stop this purchase of oil-sand produced “dirty” oil.  They have succeeded to a limited extent in disrupting immediate construction, however my guess would be that the need to diversify away from the geo-political nightmare that is foreign oil will be a stronger argument than the one environmentalists put forward.

 

TransCanada Corp’s (TRP) stock is trading right around $40 a share at the moment.  It has stayed fairly consistent given the market volatility the past few years.  It has a 52-week high of $43.72 and a low of 35.49.  I wouldn’t say this is a “no-brainer” buy, as the company is valued at a sizeable price-to-earnings ratio of about 21, but one could do a lot worse if they are looking for stable dividend payer.  TransCanada has a solid history of upping their dividend, and their current annual dividend at 1.68 has a solid yield of over 4%.

 

TransCanada Corp (TRP) Dividend Stock Graph:

TSE TRP

TransCanada Corp (TRP) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
TRPTransCanada Corp41.244.0790.380.835.585.19

The Pembina Pipeline Corporation (PPL)

The Pembina Pipeline Corporation (PPL) is another company that has recently seen a corporate restructuring as it went from an income trust, to becoming an incorporated entity.  If you are not familiar with the reasoning behind all these recent moves, the Canadian government switched the taxation rules on almost all income trusts beginning in 2011.  Up until this year, companies had found that the income trust structure had several advantages that allowed them to payout extremely high dividends to their shareholders.  The only industry that was allowed to keep the old advantages was real estate-based trust funds, more commonly referred to as Real Estate Income Trusts (REITs).  While the government is taking a somewhat larger bite out of many of these newly incorporated entities, there are still plenty of profits to go around.

 

Pembina (PPL) became a publically traded company in 1997.  Since that time it has seen extreme growth, and has paid out an extraordinary $1.5 billion dollars to its investors, while at the same time seizing acquisition opportunities.  The company has always sought to be a cost-effective, profitable entity that can pass along substantial cash-flow to their stakeholders.  One of their key strategies has been (and will continue to be) to diversify their asset portfolio in order to provide long-term value for shareholders.  They seek to lessen the risk associated with market volatility in a single sector.  That being said, they will continue to focus on the core of their business – the ultra-profitable crude oil and natural gas transportation industry.  The Pembina Pipeline Corporation (PPL) is also extremely proud of their environmental record within a controversial industry, and their outstanding history of community engagement.

 

Pembina’s two major pipelines are the Nipisi Pipeline and the Mitsue Pipeline.  Nipisi is designed to transport 100,000 barrels per-day of heave oil.  It runs from North of Slave Lake, Alberta, to Swan Hills, Alberta, and from them to Edmonton, Alberta.  Plans for expansion of the pipeline to a 200,000 barrel per-day limit are in place.  The Mitsue pipeline is smaller, but still significant.  It was originally built to transport 20,000 barrels per-day of condensate (which is used to refine the heavy oil) and runs from Whitecourt, Alberta, to Swan Hills, Alberta.  Plans are in place to expand this pipeline as well, taking it up to a capacity of 45,000 barrels per-day.

 

While Pembina (PPL) has plenty of competitors within the huge Canadian energy sector, its fundamentals hold up quite well.  It’s currently trading at around $25 per-share, with a price-to-earnings ratio of 22.85.  Its annual dividend of 1.56 (paid monthly) gives it an attractive dividend yield of 6.2%.  Given the strength and future outlook of the Canadian energy sector, investors looking for strong dividend performers really can’t go wrong with many of the options that are offered.  Pembina Pipelines certainly belongs in the discussion if you’re looking for a high-dividend position with exposure to the energy sector.

 

The Pembina Pipeline Corporation (PPL) Dividend Stock Graph:

TSE PPL

The Pembina Pipeline Corporation (PPL) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
PPLPembina Pipeline Corp23.46.67143.330.427.630.00

Pacific Northern Gas Ltd (PNG)

 

Pacific Northern Gas Ltd (PNG) was incorporated in 1965, and went public in 1968.    Unlike some of its competitors, Pacific is a fairly focused company, with the vast majority of its business in the natural gas industry.  They own natural gas pipelines of various sizes throughout Western Canada.  It currently has about 1200 km of pipeline in all.  Pacific Northern (PNG) currently supplies 40,000 residential, industrial, and commercial clients.  They are the main supplier of natural gas throughout all of British Columbia, and have notably large clients such as West Fraser Mills Ltd, Rio Tinto Alcan, and B.C. Hydro.  Together, those three giants accounted for about 30% of the company’s total gas deliveries and six percent of their operating revenues.

 

Pacific Northern Gas Ltd. (PNG) basically started out in 1968 as a single transmission line that ran from a spot north of Prince George at Summit Lake, through Prince Rupert and Kitmat on the coast.  It was mainly a line meant for large commercial companies.  In 1993 PNG saw a major expansion as they bought out Northland Utilities Limited, including their Tumbler Ridge and Dawson Greek Operations.  They expanded their industrial footprint again in 1997 when they acquired three more regional natural gas companies in Fort St. John, the Granisle, and the Peace River Transmission Company.  The company saw a corporate restructuring in 2000 in response to liquidity issues which have now been rectified.  The most recent news for the company is their recent plan to purchase enough shares of Pacific Trail Pipelines (PTP), to connect their system with the Kitmat export terminal which would mean huge dollar is liquefied natural gas business.

 

Pacific Northern Gas (PNG) is a regional natural gas play, and does not have the stability of some of the other large scale energy companies listed on the TSX, although it may have more room for growth.  One of the advantages of being so focused within single industry is that when that industry is doing well, your profit percentages, and rapid growth can be very attractive to potential shareholders.  The entire natural gas sector has been rising for months now and shows no signs of slowing down.  With the USA and Canada investing large sums of money in energy transfer infrastructure, PNC could be the next company to broker a deal that sees them take advantage of the massive American market that lies just to the South of their already established pipeline system.

 

With energy costs skyrocketing around the world, natural gas will likely be profitable in both the short and long terms.  Pacific Northern Gas’ (PNC) stock is currently trading around $26 per share, and this is right in the middle of its trading range over the last couple of years.  It has a relatively small market cap of just under $100 million.  It is paying an annual dividend of $1.20, which gives the stock a dividend yield of 4.6%.  This is a great deal for shareholders in that they get healthy cash flow, while at the same time owning a company that has substantial growth prospects.

 

 

Pacific Northern Gas Ltd (PNG) Dividend Stock Graph:

TSE PNG

Pacific Northern Gas Ltd (PNG) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
PNGPacific Northern Gas Ltd30.13.9960.850.8839.06311.88

Inter Pipeline Fund (IPL-U)

There are various different ways to get portfolio exposure to oil, and the broader energy transportation sector.  You can invest in some of the major companies in the field, or you can invest in the Inter Pipeline Fund (IPL-U).  When you buy into Inter Pipeline your not actually purchasing shares of an incorporated business like you would buy shares of an oil company for example.  Instead, you are actually buying “units” of a publically traded limited partnership.  The fund was started in 1997 and it now has massive holdings in petroleum transportation, and the extraction, transportation, and storage of natural gas.  It is based out of Calgary, Alberta, Canada.  While the fund does have most of its assets in Western Canada, it also has international holdings in the UK, Ireland and Germany.  It represents an excellent way to invest in a revenue-producing investment vehicle that is made up of mature, cash-flow positive, stable, energy producers.  Unlike most dividend-payers, who pay their shareholders quarterly, bi-annually, or annually, the Inter Pipeline Fund (IPL-U) distributes profits monthly.

 

In Western Canada along Inter Pipeline has over six thousand kilometres of petroleum pipelines, and owns 4.8 million barrels of storage capacity.  The system can move almost one million barrels of oil per day (this accounts for about a third of all oil sands production).  The Inter Pipeline Fund (IPL-U) is far from a pure oil play however, it is also one of the biggest natural gas owners in the world.  The fund’s three extraction facilities in Alberta produce about 40% of the total natural gas exported from the provincial leader.  If you have seen the name Simon Storage Limited in the field of oil and chemical storage around the world (capacity of eight million barrels), then you have been exposed to yet another aspect of the fund’s holdings.  Simon is a fully owned international subsidiary of the Inter Pipeline Fund (IPL-U).

 

The most recent news about the fund is that its monthly disbursements will be receiving more beneficial tax treatment in months to come relative to 2010.  This is due to the government recognizing the structural return of capital in the monthly disbursements.  With the world requiring more and more energy-related production and services, the Inter Pipeline Fund is an excellent way to invest in this reality.  It is currently trading at around $16 per-unit (you don’t buy shares of a fund remember).  This gives it a price-to-earnings ratio of about 18, and a dividend yield of 6%.  With such a large market capitalization (well over $4 billion), it is no wonder that most analysts are giving this dividend-producing giant a “buy” rating at the moment.  The fund also has a great Dividend Re-Investment Plan (DRIP) that includes a great 5% discount when you automatically re-invest your dividends.  When you combine this feature with the monthly distributions, it can allow investors to build up a solid position in the fund quite quickly.

 

Inter Pipeline Fund (IPL-U) Dividend Stock Graph:

TSE IPL-U

Inter Pipeline Fund (IPL-U) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
IPL-UInter Pipeline Fund16.395.8699.080.733.946.94

 

Enbride Inc (ENB)

Enbride Inc (ENB) is a global leader is the field of energy transportation.  They are currently operating the longest, and self-proclaimed “most sophisticated” crude oil transportation system in the world.  While maintaining their market share in the oil market, the company is expanding into the transportation of natural gas, and has a developing renewable energy program that includes advances in the fields of wind and solar energy, as well as hybrid fuel cells.  Enbridge’s headquarters are located in Calgary, Alberta, and they employ about 6,000 workers across North America.  They have been recognized as one of the Global 100 Most Sustainable Corporations in the World, and one of the 100 top employers to work for in Canada.  The company’s vision is, “To be the leading energy delivery company in North America.  We deliver energy and we deliver value to shareholders.”  I like the simplicity of that concept.  Any company that keeps its eyes focused on leading in their field and rewarding their shareholders is very attractive to dividend investors.

 

oilThe most recent news about Enbridge is their plans to acquire Tonbridge Power Inc. (TBZ) for 54 cents per share.  This brings the total price tag to about $20 million, and is the first time Enbridge (ENB) has entered into the electricity transmission market.  The project is also noteworthy because the transmission line would run internationally between Canada and the USA.  It would take over what Tonbridge had labelled the, “Montana Alberta Tie Line.”  The line will link Great Falls, Montana with Lethbridge, Alberta, using a 345 km line.  The $20 million acquisition price tag is only the beginning of the company’s projected expenses for the transmission line however.  Enbridge will take over the $50 million in debt on Tonbridge’s balance sheet, and will inject another $250 million into the project in order to bring it to its 600 megawatt full potential.  While this is obviously a substantial investment, Enbridge (ENB) can afford to invest some capital at the moment as their second-quarter profits nearly doubled those of last year.  They recently reported earning $259 million ($.35 cents a share), up from 138 million ($.19 cents a share).  The Alberta Oilsands continue to be the lifeblood of the company, and they show little signs of slowing production.

 

Enbridge is currently trading at around $30 per share.  With people rushing to Canadian oil companies as a safe haven, Enbridge (ENB) is definitely not trading at a discount.  Even with their substantial quarterly earnings, they still have a price-to-earnings ratio of almost 23.  Their annual divided is just under a dollar at 98 cents right now, and consequently the dividend ratio is 3.2%.  With the USA needing the Oilsands more and more, there is probably not a better stable dividend supplier than Enbridge right now.  While you may be able to get better yields else where, this company has solid growth prospects, as well as the maturity needed to pay a substantial dividend.  This combination makes it a leading recommendation among Canadian dividend experts.

 

Enbride Inc (ENB) Dividend Stock Graph:

ENB

Enbride Inc (ENB) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
ENBEnbridge Inc60.543.2467.290.7010.4715.09

 

 

image credit

 

AlataGas Ltd (ALA)

 AlataGas Ltd (ALA) started as a small power company operating out of Alberta in 1909.  Over the last century they have grown into one of North America’s largest electricity-generating companies.  They have roughly nine billion dollars in assets, and have recorded yearly revenues in the three billion dollar range.  AlataGas is now the largest investor-owned power generator in Canada and was actually the first such Canadian company to be traded on the New York Stock Exchange (NYSE).  AltaGas (ALA) has also made the jump into international operations when they opened power plants in the USA and Austrailia.  Alta has a very diversified set of energy interests, with divisions dedicated to natural gas extraction and transmission, coal-fired and gas-fired power generation, and other energy sources.  Their self-proclaimed business philosophy is, “That the best measures of a business’ long-term viability and value are its net income, cash flow and return on equity.  The importance of these traditional financial measures is driven by sound business fundamentals.”  This is music to the ears of experienced investors across North America.

AltaGas recently reported a decent jump in income through the first quarter of 2011.  Their quarterly statement showed just over $38 million in income before taxes, compared to $31 million in 2010.  David Cornhill, the Chairman and CEO of AltaGas (ALA) explained the rise in profits to the Globe and Mail, stating that, “We saw higher natural gas volumes in areas where producers are capitalizing on liquids-rich and solution gas, the benefit of our growing rate base and colder weather at our utilities and higher power prices and volumes.  Our overall results reflect the strength of the Corporation’s diversified portfolio of energy infrastructure assets.”  Alta also has also continued to grow its renewable energy sector.  In 2011 they continued their Forest Kerr project in British Columbia.  The project is set to go online July 2014 and BC Hydro has already signed a 60-year electricity purchase agreement with the company.  The other main focus of AltaGas (ALA) at the moment is the Gordondale Gas Plant, which the energy giant hopes will be able to capitalize on the quickly escalating natural gas market.

The Globe and Mail also reported that AltaGas has seen its share of insider action lately with multiple directors buying into serious positions within the company.  This is always an encouraging sign for investors.  With the company seeing increased profits, growing revenues in multiple sectors, and having a stable plan for expansion in place, there is no reason to believe that AltaGas (ALA) will quit rewarding its shareholders anytime soon.  Even at the relatively expensive price-to-earnings ratio of 25.27, and the company trading near its 52-week high ($27 per share), Alta is still rated a “buy” for many ratings agencies out there.  No doubt due in part to the company’s healthy 5% dividend yield.

 

AlataGas Ltd (ALA) Dividend Stock Graph:

TSE ALA

 AlataGas Ltd (ALA) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
ALAAltaGas Ltd25.165.2555.680.51-5.13-32.41