Some Canadian dividend stocks from the energy sector are hard to overlook, mainly because they have the potential to offer a good mix of reliable income and stability, even in a volatile economic environment. Pembina Pipeline (TSX:PPL) is one of those stocks, with a history of providing consistent dividends since 1997 and a current yield of 4.7%.
While this yield may look attractive, especially for income-focused Foolish Investors who can hold it for the long term, it's still important to analyze whether Pembina could continue to maintain these payouts and adapt to expected shifts in the energy market. Let's dig deeper into Pembina's recent financial growth trends and the factors that could impact its future performance to find out whether its 4.7% yield justifies adding it to your portfolio right now.
Analyzing Pembina Pipeline's financial growth trends
After rallying by about 48% in the last year, Pembina currently trades at $58.23 per share with a market cap of $33.9 billion. The Calgary-based company mainly focuses on energy transportation and midstream services, including pipelines and natural gas processing facilities.
PPL stock's strong performance is a reflection of its solid earnings growth and cash flow generation, which have allowed the company to maintain and even grow its dividend payouts over the years. Notably, Pembina's total revenue climbed by 24% in the five years between 2018 and 2023, while its adjusted annual earnings inched up by nearly 31%. Interestingly, Pembina Pipeline raised its dividends by more than 60% in the last 10 years (ended in 2023).
Despite recent volatility in commodity prices, Pembina is continuing to maintain this positive financial growth in 2024. In the second quarter of 2024, the company posted a solid 32.6% YoY (year-over-year) jump in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to a record $1.1 billion.
Its acquisition of higher interests in Alliance and Aux Sable contributed to PPL's stronger results and expanded its presence in U.S. operations. These strong results also encouraged Pembina's management to raise its full-year 2024 adjusted EBITDA guidance.
Is Pembina stock a buy for its attractive dividend yield?
Looking beyond just the numbers, the Canadian energy infrastructure company's strategic projects, like the Cedar LNG (liquid natural gas) project and Peace Pipeline expansion, are positioning it for long-term growth. The Cedar LNG project, a partnership with the Haisla Nation, aims to bring low-carbon Canadian LNG to international markets. With a positive final investment decision in June 2024, I expect this US$4 billion project to accelerate Pembina's future earnings growth trends.
Pembina's recently completed Phase VIII of the Peace Pipeline expansion further strengthens its ability to meet growing demand in Western Canada. These projects are not only expected to support higher volumes but also enable the company to optimize its extensive pipeline network more cost-effectively.
Considering that, I wouldn't be surprised if Pembina continues to grow its dividend payouts in the coming years. That's why PPL stock's attractive dividend yield not only makes it appealing, but the company's long-term growth prospects add to its potential for continued upward momentum.
