The Globe and Mail reports in its Thursday edition that normally the mid-stream energy sector is
a decent place to ride out
market volatility, but
this is no typical oil slump.
The Globe's Tim Shufelt writes that the energy crash has
engulfed
Canadian stocks exposed
to the oil patch.
Almost all of the Canadian mid-stream
stocks have good cash
flow visibility over the next two to
three years, says RBC
analyst Robert Kwan.
Supporting the valuations on
many mid-stream stocks was the
expectation for at least 10-per-cent-cash-flow growth, says Mr. Kwan. Gibson Energy, Inter Pipeline, Keyera
and Pembina Pipeline have all declined in share
price by 20 per cent to 35 per cent
since September.
TransCanada and Enbridge
have fared
somewhat better as a result of
investors favouring larger names.
Valuations are more
attractive now as a result of the
correction, but are still above historical
averages.
The sell-off has opened up what
might be considered compelling
entry points for Gibson, Inter
Pipeline, Keyera and Pembina,
based on yields in the 4.5-per-cent to 5-per-cent range and dividend growth
of about 10 per cent, but with one
big caveat, that oil prices stop falling,
says Mr. Kwan.
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