Is Keyera (TSX:KEY) Stock a Buy Right Now?

Keyera stock is currently in the limelight due to rising energy prices and the Russia-Ukraine conflict, but is this mid-cap energy stock worth buying right now?

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The onset of COVID-19 and ensuing lockdowns devastated global economies for the better part of two years before the intensity of the global health crisis died down. Just as the world started moving into a post-pandemic era and global economies began to reopen, another black swan event came along to reintroduce more volatility.

Russia’s invasion of Ukraine and heightened geopolitical tensions resulting from the war resulted in many companies distancing themselves from Russia. The aggressor in the Russia-Ukraine conflict is one of the largest oil-producing countries. Many European countries are now facing energy shortages due to uncertainty in the global energy supply.

Energy demand is outpacing supply, pushing oil and gas prices higher. As a result, end-consumers are grappling with higher living costs. However, energy stocks have benefited from higher energy prices. One of the companies that is enjoying improved financial performance is Keyera Corp. (TSX:KEY).

Today, I will discuss Keyera stock and explore whether it could warrant a spot in your self-directed investment portfolio.

Mid-cap oil and gas company

As of this writing, Keyera stock trades for $31.24 per share. The $7 billion market capitalization midstream oil and gas company has seen its share prices surge alongside energy prices. Between January and June 2022, Keyera stock surged by almost 23% due to higher oil and natural gas prices.

Currently, Keyera stock trades at an almost 12% discount from its 52-week high. Is the dividend stock worth buying right now?

Several business verticals

Keyera is a midstream company in Canada’s energy industry. It primarily acquires crude oil and natural gas from producers, then processes, transports, stores, and markets energy products. The company essentially establishes a link between energy consumers and producers through an integrated structure.

The company generates revenue through three business verticals:

Its Gathering and Processing segment comprises a 4,400 km-long gas gathering network and gas plants. This business vertical’s revenues depend on the volume of natural gas it processes and transports. By processing natural gas liquids, Keyera produces several crucial products in this segment including ethane, butane, condensate, and iso-octane. These are all vital to several industries, making it an essential service.

Its Liquids Infrastructure segment provides crude oil processing and transportation while its Marketing segment supplies processed oil and gas products to end consumers, including industries and individuals. The Marketing segment benefits greatly from higher energy prices, providing the cash flows necessary to develop more infrastructure projects.

Foolish takeaway

The S&P/TSX Composite Index is down by 7.89% year-to-date as of this writing. Keyera stock is up by 8.93% in the same period, outperforming the broader market by a significant margin despite its decline in recent months. It has a strong balance sheet which is reflected by its performance on the stock market this year.

In the first quarter of fiscal 2023, the company is expected to open a $900 million pipeline, running from northwest of Grande Prairie to Saskatchewan. The new pipeline will add another revenue stream, bolstering its natural gas-related services.

Russia is a major natural gas producer, and several European countries rely heavily on it. In light of the current conflict, Keyera can become well-positioned to cater to growing demand and boost its cash flows.

Keyera looks strong and is a solid dividend stock that pays out dividends to shareholders on a monthly basis. At current levels, it boasts a juicy 6.15% dividend yield. All things considered; Keyera can be an excellent addition to your portfolio.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends KEYERA CORP. The Motley Fool has a disclosure policy.

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