Income investors are searching for alternatives to boost the yield on their savings. One popular way to achieve this goal is to own dividend stocks.
Let’s take a look at Veresen Inc. (TSX:VSN) to see if it deserves to be in your portfolio today.
Operations
Veresen is an energy infrastructure player with operations in the pipeline and midstream segments.
The company recently announced the sale of its power generation assets.
The pipeline business primarily consists of interests in two systems, including the 3,000 km Alliance Pipeline that delivers natural gas and gas liquids to the Midwest United States, and the Ruby Pipeline that carries natural gas in Wyoming and Oregon.
The midstream assets include an interest in the Aux Sable natural gas liquids (NGL) fractionation facility and NGL storage and distribution facilities. Veresen also has a 50% position in Veresen Midstream, which is focused on developing and owning infrastructure in top basins, such as the Montney region.
Financial results and strategy change
Veresen delivered solid results in 2016.
Full-year distributable cash came in at $356 million, or $1.14 per share, compared to $310 million, or $1.06 per share in 2015.
Adjusted net income for the year was the same as 2015, at $0.19 per share.
The company decided to exit the power business and recently secured deals totaling $1.18 billion for its gas-fired, renewable, and waste heat assets.
Veresen will use the proceeds of the sales, which are expected to close in Q2 2017, to fully fund the remaining equity requirement for $1.5 billion in development projects.
The move alleviates some balance sheet concerns and Veresen expects to see its debt to EBITDA drop from 5.7X to a range of 4-4.5X.
Dividends
Veresen pays a monthly dividend of 8.33 cents per share, which currently provides an annualized yield of 6.3%.
The company hasn’t raised the payout in a decade, but it also held it steady during the Great Recession, and through the downturn in the past two years.
Should you buy?
The company’s balance sheet issues should be sorted out and the dividend looks safe. Contrarian types who had the courage to buy at the lows last year are now sitting on some nice gains.
Investors probably won’t see dividend growth in the near-term, but the stock might be worth a look for those searching for above-average yield with distributions paid out on a monthly basis.
