If you’re looking to boost your monthly income, you’re in luck. Keyera (TSX:KEY) just came out with fabulous results celebrated by a 9.5% pop in the high-yield stock on Friday after it reported its Q4 and full-year results on Thursday.
The oil and gas pipeline company has been a consistent dividend payer for a long time. Specifically, it has increased or maintained its dividend per share every year since 2004. It last increased its dividend in September.
Keyera is predominantly a fee-for-service business that comprises natural gas gathering and processing; natural gas liquids processing, transportation, storage and marketing; iso-octane production and sales; and a condensate system in the Edmonton/Fort Saskatchewan area of Alberta.
Q4 results
Here are some key metrics compared to the same period in 2017. They indicate a strong Q4.
| Q4 2017 | Q4 2018 | Change | |
| Net earnings | $88 million | $165 million | 87% |
| Earnings per share | $0.45 | $0.79 | 75% |
| Cash flow from operating activities | $212.6 million | $245.6 million | 15% |
| Distributable cash flow | $173.9 million | $200.4 million | 15% |
| Distributable cash flow per share | $0.90 | $0.96 | 6.7% |
| Adjusted EBITDA | $197.4 million | $248.3 million | 25.8% |
Full-year results
Looking at Keyera’s full-year results shows a more normalized picture of the business.
Here are some key metrics compared to the same period in 2017:
| 2017 | 2018 | Change | |
| Net earnings | $289.9 million | $394.2 million | 36% |
| Earnings per share | $1.53 | $1.90 | 24% |
| Cash flow from operating activities | $513.7 million | $604.3 million | 17% |
| Distributable cash flow | $510.4 million | $638.1 million | 25% |
| Distributable cash flow per share | $2.70 | $3.08 | 14% |
| Adjusted EBITDA | $617 million | $807.3 million | 30% |
Keyera reported strong double-digit growth even for its distributable cash flow on a per-share basis. Its payout ratio improved from 61% in 2017 to 56% in 2018, which supports a safer dividend with greater room for future dividend growth.
Dividend safety
Keyera has increased its dividend per share every year since 2004 with the exception of 2010, when it froze its dividend, which indicates good management. The energy infrastructure company has a three-, five-, and 10-year dividend growth rate of 9.4% and 9.9%, and 8.4%, respectively.
Last September, Keyera increased its monthly dividend by 7.1%. Its payout ratio of 56% makes its yield of 5.8% as of writing sustainable.
Investor takeaway
Keyera’s long-term normal price-to-cash-flow ratio is about 12, which indicates a target price of $38 and change per share and +23% upside potential.
The analyst consensus from Thomson Reuters has a 12-month target of $37.80 per share on Keyera, which aligns with the long-term normal multiple and represents +21% near-term upside potential. Throwing in the 5.8% yield, we’re looking at compelling estimated near-term returns of +27%.
Keyera expects to generate higher fractionation fees beginning in April as well as benefiting from lower butane prices in Alberta, which is good for its iso-octane business.
Despite the pop in the stock, Keyera still offers good value for rich monthly dividend income and decent price appreciation potential. Technically, it has been in a downward trend. It needs to break above and stay above $32 per share to begin cracking that trend.
