Recent Purchase: Inter Pipeline Ltd (IPL)
On February 19th, I added 43 shares of Inter Pipeline Ltd (TSE: IPL) to The Dividend Beginner’s portfolio. I purchased the shares at $23.20, with a trading cost of $6.95 for a total cost basis of $1, 004.55.
Inter Pipeline Ltd pays a monthly dividend of $0.13, or an annual dividend of $1.56. My initial yield on cost works out to 6.72%. I really like monthly dividend paying companies, and am grateful to have the opportunity to add another to my fleet. Considering I’ve purchased 43 shares, IPL adds $67.08 to my annual dividend income, or $5.59 per month. IPL has increased their dividends consecutively for 13 years. In fact, IPL meets all of the Dividend Beginner stock picking criteria. My stake in IPL has increased my 12-month forward annual dividend income from $1, 307.62 to $1, 374.70, an increase of 5.13%. My monthly average dividend income now stands at $114.56.
|Before IPL||Net Increase||After IPL|
|Annual Dividend Income||$1, 307.62||$67.08||$1, 374.70|
|Monthly Dividend Income||$108.97||$5.59||$114.56|
You may notice this is less than I usually invest per transaction, but I’ve decided I’d like to nibble at the market more than consume it these days, as I can spread my money farther and diversify more; in addition, I set myself up to add more to core positions if the share price falls. As a result, if IPL were to fall further I would definitely average down. I’m certain some may think, “Well, it’s not so worth it relative to the transaction cost eating up a decent portion of your return“, to which I’d respond, “It makes more sense to pay a bit more percentage-wise for transaction costs, than to invest more and lose more of your capital“.
IPL had released record financial results for 2015 the day prior to my investment, amid a very tough energy market – which is impressive, while others falter. IPL has a smaller market cap than many of the other Canadian pipelines (Enbridge, TransCanada, Pembina, etc…), which usually translates to it having more room to grow.
Following are some highlights I particularly enjoyed from their 2015 earnings:
- Generated record funds from operations of $774 million, a 37 percent increase over 2014 results
- Net income increased 33 percent to a record $463 million for the year
- Declared cash dividends of $497 million, or $1.49 per share
- Attractive annual payout ratio of 68 percent
- Announced a six percent increase to monthly cash dividends, the 13th consecutive increase for Inter Pipeline shareholders