Recent Buy – Inter Pipeline Ltd

Inter Pipeline Ltd

As the market continues its relentless climb, I have been weary and finding it harder to find some good investment opportunities. The purchases have all but dried up in my portfolio. However, I was finally able to pull the trigger last week when I saw a pretty good opportunity in the energy sector. Midstream/pipelines were one of the best performers in 2016 and the stock picking competition resulted in Top 3 to be pipelines. However, they seemed to have pulled back a bit this year, and I decided to add to my existing position.

I added 100 shares in Inter Pipeline Ltd (IPL.TO) @ C$26.00. The company pays C$1.62 in dividends annually and currently yields 6.15%.

Recent Buy Decision

  • I have owned Inter Pipeline for years now and this company has been one of the most reliable monthly payers in my portfolio. It’s a company, I am very familiar with and am confident to put more money to work.
  • The stock, after a fantastic Β 2016 (40% in capital gains + dividends in 2016), has pulled back about 10% so far YTD in 2017. I think its a pretty good valuation currently to buy more shares.
  • The company has been expanding its business and has a very well diversified business model. Diversification comes from Oil Sands Transportation, NGL Processing, Conventional Oil Pipelines and Bulk Liquid Storage (see image below for details).

  • IPL also has been expanding geographically with bulk storage terminals in Europe.
  • IPL recently successfully completed the acquisition of NGL midstream business from Williams Canada for $1.35B, expanding its footprint in the space.
  • I bought this in my trading account, so I may or may not decide to write some covered call options on this position in the future, depending on how the opportunity presents itself. I am hoping to get ever juicier than 6.1% that the stock currently offers πŸ™‚
  • Instead of rehashing all the points of why I believe in this company, here is a link to the corporate presentation.

What do you think of this purchase. Be sure to leave your thoughts below.

Full Disclosure: Long IPL.TO. Our full list of holdings are available here.

12 thoughts on “Recent Buy – Inter Pipeline Ltd

  1. Thanks for sharing your investment decisions! This stock looks great – and talk about EBITDA growth in recent years. I’ll definitely take a closer look.

  2. Lanny says:

    not sure about this stock, maybe ur buying in at the bottom. Since mid April its dropped from $28.74 down to $25.73.

    • Haha you read my thought. I will hold it for a while and collect my monthly dividends. Once it gets to a higher price, I will start writing some covered calls on it πŸ™‚

      R2R

  3. I looked at IPL a couple of years ago but passed based on the limited geographic footprint (excluding Europe). Today, this could be a relative strength as they don’t have a major permitting process issue (as do their competitors) nor the economics of dealing with exports via Vancouver. With pipeline capacity at a premium, I see minimal downside on this one. Similar reasoning for my KSU purchase (oil train terminal facilitating Canadian oil exports).

    • Thanks for sharing your thoughts, Charlie. I concur with your reasoning and hence the investment. INteresting that you picked up KSU as well — its a company that I have been following for a while and really find it interesting how its strategically positioned. Tempted to take a position in it myself.

      R2R

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