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Pembina Pipeline Corp (PBA): 1 Canadian High-Yielder You Should Consider

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While Candian midstream giants Enbridge (NYSE:ENB) and TransCanada (NYSE:TRP) make noise with their contentious pipeline projects, another Canadian midstream company is growing quietly behind the scenes. Pembina Pipeline Corp (NYSE:PBA) is Canada’s third-largest midstream outfit. After successfully integrating its acquisition of Provident Energy and posting record performances in 2012, the company is poised to continue its strategic growth initiatives and bring further gains to investors in 2013.

2012 review
Last year was a big one for Pembina Pipeline Corp (NYSE:PBA), as the company closed on its acquisition of Provident Energy in April of last year and listed shares on the New York Stock Exchange for the first time.

Pembina generated full-year operating margin of $676.2 million in 2012, a marked improvement over 2011’s $417.1 million. The Provident assets had the biggest impact on Pembina’s midstream segment, growing operating margin from $93.2 million in 2011 to $288.5 million in 2012. These assets will continue to have an impact as NGL prices rebound sometime next year.

Full-year earnings benefited not just from the acquisition, but also from increased transportation and processing volumes. Earnings grew from $165.7 million in 2011 to $225 million in 2012.

Canada’s best bet?
Pembina’s increased volumes are a reminder that the U.S. isn’t the only place where energy is booming. There is an awful lot of oil and gas buried in Canada, which makes the country’s midstream industry an intriguing investment idea. Let’s see how Pembina stacks up compared with its Canadian peers:

Company Market Cap EPS P/E Yield
Pembina $8.44 billion 0.89 32.75 5.60%
TransCanada $33.05 billion 1.88 24.97 3.80%
Enbridge $36.05 billion 0.80 56.23 2.80%

Source: Yahoo! Finance.

Though Pembina Pipeline Corp (NYSE:PBA) is Canada’s third-largest midstream company, it is significantly smaller than Enbridge and TransCanada, but what it lacks in size it makes up for in yield. None of these Canadian companies is an MLP, the business structure that allows for extremely high distribution yields and is quite common with their American midstream cousins. Still, Pembina manages a 5.6% yield and an annualized payout of $1.59 per share.

Looking ahead
A high yield is great, but it means nothing if the company’s future growth can’t sustain it. Let’s look at a handful of projects Pembina Pipeline Corp (NYSE:PBA) has on its radar for 2013 and 2014:

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