Yahoo Finance Pembina Pipeline (TSE:PPL) Is Paying Out A Larger Dividend Than Last Year
The board of Pembina Pipeline Corporation (TSE:PPL) has announced that it will be paying its dividend of CA$0.69 on the 28th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 5.5%, which is in line with the average for the industry.
Check out our latest analysis for Pembina Pipeline
Pembina Pipeline's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Pembina Pipeline was paying out 86% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Earnings per share is forecast to rise by 20.9% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Pembina Pipeline Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$1.62 in 2014, and the most recent fiscal year payment was CA$2.76. This means that it has been growing its distributions at 5.5% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Pembina Pipeline's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Pembina Pipeline has been growing its earnings per share at 5.7% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Our Thoughts On Pembina Pipeline's Dividend
Overall, we always like to see the dividend being raised, but we don't think Pembina Pipeline will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Pembina Pipeline that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
