Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

5 Reasons to Buy Inter Pipeline (TSX:IPL)

Published 2019-05-25, 03:15 p/m
Updated 2019-05-25, 03:36 p/m
© Reuters.

© Reuters.

Inter Pipeline (TSX:IPL) remains one of the most lucrative and least-known stocks on the market. As the name suggests, Inter Pipeline has a pipeline segment, but the company offers much more, as it is better classed as an energy infrastructure company. So, what exactly makes Inter Pipeline a good investment option? There are actually five viable reasons to consider investing in the stock at the moment.

The lucrative pipeline business The pipeline business can be a mixed blessing and curse at times. On the one hand, pipelines provide a reliable source of revenue for the company, and all of that revenue is rarely, if ever impacted by the price of the commodity traversing the network. In other words, pipelines charge by volume and are best compared to a toll-booth network on a busy highway.

In the case of Inter Pipeline, the company has a network that spans over 3,900 km. It was responsible for transporting over 1.4 million barrels per day in the most recent quarter.

The booming storage business If the pipeline business is best viewed as the toll-road network, Inter Pipeline’s storage business would be the conveniently located rest stops. In total, Inter Pipeline has 23 storage units situated across Europe with a capacity of 37 million barrels. In the most recent quarter, the storage business generated $26.8 million funds from operations, reflecting an $8.1 million improvement over the same period last year.

The Heartland Petrochemical complex Once completed in 2021, the rapidly emerging $1.3 billion petrochemical complex will take locally sourced, low-cost propane and turn it into polypropylene, which is a unique plastic used in a variety of manufacturing processes.

The complex is the first of its kind in Canada, and upon completion it will introduce another lucrative revenue stream into Inter Pipeline’s already diversified mix.

A great source of dividend income Who doesn’t love a good dividend stock? Inter Pipeline currently offers an eye-catching yield that comes in at 7.84%. One of the first reactions that a yield that high may trigger is “it’s unsustainable,” and while there’s always a risk of a dividend being cut, Inter Pipeline’s handsome distribution typically comes in at a sustainable payout ratio, most recently below 80%.

The complete package While none of the above reasons stand out on their own as compelling reasons to invest in Inter Pipeline, factoring all of the above into consideration paints a picture of a well-diversified energy infrastructure company that is not only generating a good amount of revenue but is also investing in lucrative growth strategies and providing a very lucrative dividend to investors.

In other words, that complete package makes it hard to not invest in Inter Pipeline, which, in my opinion, should be in every portfolio.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.