Canadian investors are blessed with having access to an array of incredible investments in the energy sector, and chief among those investment options has always been Inter Pipeline (TSX:IPL), the Calgary-based energy transportation and infrastructure giant that is seemingly able to avoid the spotlight, despite being one of the most promising options on the market at the moment.
What has made Inter Pipeline great?
There are a few reasons why Inter Pipeline has always been seen as a great investment that come together to form a complete package. First and foremost, there’s the pipeline business. The company’s pipeline network, which consists of nearly 8,000 km of pipeline across several different segments provides a steady stream of income for the company, which has drawn parallels to a toll-road network in the past. In short, the system transports over 1.4 million barrels per day.
Further to that, Inter Pipeline’s sprawling storage terminal network, with a capacity of 37 million barrels, is located across several countries in Europe, while at home the company operates one of the largest NGL businesses in the nation, with a capacity to provide over 240,000 barrels per day of NGL.
Perhaps one of the most long-standing reasons that investors turn back to Inter Pipeline has to be the company’s dividend. The current monthly payout works out to a very attractive 7.74% yield. Additionally, despite that high yield, the dividend-payout ratio has remained in a respectable and stable range of near 60%. This has fueled strong growth of that dividend to even higher levels, thanks to a series of consecutive increases spanning back a decade.
What has changed?
Another appealing point of note comes in the form of the Heartland Petrochemical Complex. The multi-billion-dollar complex under construction is inching closer to completion, with the massive propylene-propane splitter, which weighs 800 tonnes and spans nearly the length of a football field, hoisted into position last week with the help of one of the largest cranes in the world — a 430-foot ring crane.
Once complete, the complex will take locally sourced, low-cost propane and convert it into polypropylene, which can then be used to manufacture a host of plastic goods across a wide span of product segments from automotive product and currency to medical products and storage containers. Inter Pipeline is forecasting that once complete within the next two years, the Heartland Complex will provide up to $500 million in annual average EBITDA and have one of the lowest cast costs on the continent.
Keep in mind that propane prices remain low and demand for polypropylene is expected to grow nearly 22% over the next five-year period.
That impressive opportunity for growth is already on top of the cash flow growth numbers, which have averaged 8% over the past decade and hit nearly 12% of CAGR over the past five-year period alone.
In other words, Inter Pipeline, with its impressive dividend, stable pipeline business model, and diversified holdings, is also one of the hottest opportunities for long-term growth on the market. Buy it and then sit back and watch that juicy dividend expand your portfolio over the next decade.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.