Recent Buy – IPL

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A quick update on another purchase to wrap up January 2018. This time, its a purchase adding to my dividend growth portfolio after a long time. Its been hard to find value in this market, except in the basic materials sector. However, as I mentioned in the Outlook for 2018 post, I am looking to pull some money off the table as I have overextended in this sector of the economy — with my investment portfolio sitting close to 50% in that one sector. I am still bullish on the sector, but looking to deploy funds elsewhere in the economy, and I have been looking at related commodity plays.

For this purchase, I have looked at the energy sector and decided that I could use with some more exposure and increase my annual dividends from an existing company in my portfolio.

I decided to add to my position with 50 shares in Inter Pipeline Ltd (TSE:IPL) @ CAD$25.00. With a current yield of 6.7%, this purchase adds C$84 to my annual passive income stream. I will probably add another tranche in the coming weeks/months if theres a significant pullback as I think its a good strong play on the overall economy. But for this iteration, I have decided to limit to 50 shares.

Inter Pipeline Ltd

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.
  • My last tranche was in summer of last year (2017) and the company had just announced successfully completing the acquisition of NGL midstream business from Williams Canada for $1.35B.
  • Since then, the company has been busy. Recent developments include:
    • Announced development of Canada’s first integrated Propane Dehydrogenation (PDH) & Polypropylene (PP) complex for $3.5 billion
    • IPL announced buying the 15% stake in Cold Lake pipeline from Canadian Natural Resources (CNR) for $527M, thus taking 100% control of the pipeline.
    • Secured a new long term cost of service contract for CNR’s Kirby North project
    • Raised dividend by 3.7%, now paying C$1.68 per share annually.
  • IPL over the last few years also started diversifying geographically with terminals in Northern Europe. As per last year, EU makes 9% of the overall market share for IPL. I will be keeping a close eye when the annual report is out to see if that has changed over the course of 2017.
  • A great cash flow machine that not pays well today at 6.7%, but also grows its dividends consistently. The company has raised dividends for 9 consecutive years with 1-, 3-, 5-, and 10-yr dividend CAGR at 3.8%, 7.3%, 9.1%, and 6.9% respectively.
  • For more details, see the Inter Pipeline’s Corp Presentation.

What do you think of this purchase? Share your thoughts below.

Full Disclosure: Long TSE:IPL. Our full list of holdings is available here.

12 thoughts on “Recent Buy – IPL

  1. That’s a pretty juicy yield you picked up. I’m slightly familiar with this stock but never really looked into it seriously. It’s amazing how the energy sector is looking brighter after a couple years of some serious headwinds and many calling an end to energy/oil as we know it. As I always say… happy to see the buying continue!

    • Thanks DivHut. Yeah…the energy sector looked like it was going to collapse a couple of years ago…which I think went down as a sector-centric recession, even though most investors didnt notice it — esp when you were well diversified. IPL has been a good one for me and I will be looking to add more shares in the coming weeks/months.

      R2R

  2. Don’t know much about Canadian stocks but it looks good. I was a little underweight in energy but my mom gifted me 3 stocks 2 which went through yesterday one was Exxon so it helped pull that sector up. It’s not in my main account so I have to yet add it to my tracker which will put it inline with a few other sectors and bring my top sectors down

  3. JC says:

    Looks like a solid buy there R2R. I wouldn’t mind upping my exposure to non-US stocks and Canada seems like a decent place to park some of that investment capital. Pair that with the O&G space and InterPipeline looks like a good choice.

    • Thanks for stopping by and the comment, JC. I think the O&G sector will do pretty well this year, so not a bad time to load up on the shares. Having said that, looks like I pulled the trigger a bit too early and the stock has dropped since…might buy another lot soon.

      R2R

  4. RICARDO says:

    Have held this since 2003 @ $6.90 when it was a trust fund. It has more than paid itself back to me since then and I continue to accumulate on the dips. Looking nice right now. Will use the HELOC to buy more in the investment account. Just acquired 1000

    RICARDO

    • Nice. Ive been holding IPL for over 5-6 yrs I think … it still used to be called IPL.UN when I started. Great stock to own for income purposes. I just added another slug earlier this week. Thats a nice chunk to add 1000 shares. Congrats on adding more to your income stream.

      Best
      R2R

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