If there’s one thing that investors should have in their portfolios right now, it’s dividend stocks. These beauties pay out cash every single year, quarter or even month no matter what. As long as you’ve bought into a solid company, those dividends should continue payouts. Some may even increase the dividend yield, even in today’s market.
Let’s look at a few reasons why this dividend stock should be your next stock purchase.
Dividend stock history
First off, Pembina is solid as a rock when it comes to payouts. The dividend stock pays dividends every single month to its shareholders. Right now, that dividend is $2.52 per share per year, or $0.105 per share per month. While that may not seem like a lot, let’s also consider the company’s share price right now.
Pembina is undervalued. While the dividend stock trades at about $31 per share as of writing, it has a fair value of about $34 per share. That alone is a potential upside of almost 10%. So say you were to use your TFSA contribution room of $6,000 and buy this stock. That’s 194 shares for the same price that should get you 176 shares. That would also mean you’re bringing in $488.88 of dividends in cash each year, or $40.74 per month.
As for dividend increases, Pembina has increased its dividend at an average of 6% per year for the last decade. Investors should expect around this for future dividend increases as the dividend stock focuses on long-term growth opportunities.
Steady and stable
You might be asking, “Why would I invest in an oil company?” Well, there’s a big difference between oil companies and pipelines companies like Pembina. Pembina is the solution to the current oil and gas problem. There is plenty of crude oil in Western Canada, but few ways to ship it out, which is what caused such a drastically low price in oil.
However, Pembina has $5.6 billion in secured growth projects ready to go. These projects should be completed in the next few years. Once up and running, shareholders should see an incredible increase in both dividends and share price.
Of course, the downside is that shareholders might have to wait while the company passes strict environmental and societal legislation (as these companies should). Hopefully this will cause other pipeline companies to follow suit and Pembina will be well ahead of the pack in this regard.
Meanwhile, the dividend stock is supported by its secured long-term contracts. These contracts will continue to bring in cash for decades, which means its growth projects and the company’s dividend is completely safe. That makes it the perfect investment for today’s shareholder.
There are few real opportunities out there that offer you solid cash along with steady growth. In fact, analysts predict Pembina could increase to even $60 per share in the next year, which could happen if the company gets the green light for its growth projects.
That would leave today’s investor with a potential upside of 93%! That could turn your $6,000 investment into $11,640 for a total of $12,128.88 with dividends included. There aren’t a lot of dividend stocks that can offer that growth.
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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 Amy Legate-Wolfe owns shares of PEMBINA PIPELINE CORPORATION. The Motley Fool recommends PEMBINA PIPELINE CORPORATION.