1 of the Best Canadian Stocks to Watch in August

Motley Fool investors could see a major pop from one of the best Canadian stocks in the next two weeks after earnings and takeover talks.

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Inter Pipeline (TSX:IPL) remains of the best Canadian stocks to watch during this month. The company recently made some major announcements, including strong earnings and takeover talks. So let’s look at why Motley Fool investors should add Inter Pipeline stocks to their watch list.

What happened?

In the last few weeks, a number of newsworthy announcements have been made by Inter Pipeline management. First let’s look at the company’s second quarter earnings report. Shares climbed as the company announced that net profit more than doubled, with revenue increasing by 30%. This was far ahead of analysts expectations, which were around $524.4 million in revenue. That was 3.4% lower than the $702.9 reported by management.

But it wasn’t just the strong earnings that had investors interested in Inter Pipeline over the last few weeks, though that fact alone made it one of the best Canadian stocks to buy. The company has been juggling two competing bids from Pembina Pipeline (TSX:PPL)(NYSE:PBA) and Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP).

So what?

Pembina originally offered a deal to takeover the company for a price of $8.3 billion. The deal was set to expire on July 27. But Pembina ended the deal, adding $350 million to its balance sheet in the process from a termination fee from Inter Pipeline. That leaves the Brookfield deal totalling $16 billion on the table. At almost double the Pembina deal, it might seem like an easy choice. However, Brookfield and Inter Pipeline continue to engage in talks.

While the deal was set to expire on August 6, Brookfield recently renewed the deal to August 20. So now, for more than a week, Inter Pipeline shares haven’t moved beyond a few cents, around $20 per share. This is likely because Brookfield is looking to buy at $19.75 per share, so shares would be overvalued at this point.

What now?

Given that the deal is still up in the air, Brookfield’s plans vis a vis Inter Pipeline remain uncertain. All Motley Fool investors can count on is likely more of the same in the next year or so. Brookfield may simply want to get in on a strong company ahead of a full commodity recovery. Brookfield aims to secure companies that offer predictable, stable cash flows. Inter Pipeline would fit that bill in the next few year through its oil and gas services. It also offers the Heartland Petrochemical Complex, which, though completed, has yet to add much to revenue. This would be another undiscovered source of revenue for Brookfield.

Meanwhile, with all this news, Motley Fool investors can watch one of the best Canadian stocks to see what happens. When and if the deal closes, investors are likely to see a boost. You could therefore see a short-term increase in share price along with a 2.4% dividend yield. The deal likely won’t be completed until the end of the year, so you can add plenty to your portfolio before then.

All of this makes Inter Pipeline stock one of the best Canadian stocks to watch in the next few weeks. There is a lot on the table for the pipeline company, so Motley Fool investors should pay close attention.

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 has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infra Partners LP Units and Brookfield Infrastructure Partners.

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