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.
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.