I put the thoughts below to 'paper' this morning. Then, as the day unfolded, I watched Inter Pipeline (IPL) lose 2.83% or 66-cents. A stock, highly recommended by a number of 'expert stock pickers', was shrinking when it came to stock price and I was writing it off because of its high dividend payout ratio. Is this really the best way to play this, I wondered. (The dividend is now yielding 7.55% annually with a payout ratio of almost 109%.)
Should I be looking more deeply into IPL's financial strengths? One wants to buy on the dips. Here was a dip. Should I be adding to my position? If this leaves me overweight, I can always sell as the stock climbs, if it climbs.
I've decided to find a book I read some years ago on evaluating companies and the balance sheets. Tomorrow, or the next day, I may rewrite the following post. Who knows, maybe IPL is worth buying. Let's learn together.
Stay tuned, kin.
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When you have a self-directed investment account you have a wealth of information available to help with your stock picking. I like to check out the Action Notes Summary from TD WebBroker every morning. An Action Pick is worth a look, a Buy is a hold, a Hold is iffy and a Sell is run-away-fast.
Today two of my holdings appeared on the equity research list: Emera (EMA) and Inter Pipeline (IPL). Emera can be picked up for just less than $43 today. I paid something close to $40. TD has a target price of $48, up from $47. Inter Pipeline is now selling above $23 and heading for $31, if you believe TD. I paid a couple of bucks more and I'm in the red on the purchase at the moment and it got redder as I wrote this.
On the plus, IPL pays $342 annually and EMA delivers $1410 annually. Why the big difference? I own three times as many shares of EMA as I do of IPL.
It is not only TD that likes EMA. Morningstar has EMA on its Canada Core Picks list. It is a four star rated stock with a Morningstar fair value of $46.
Would I advise others to buy these stocks? Would I increase my holdings? No, to the last question. EMA has a dividend payout ratio of 92.5%. That's a bit high. I'll hold. That said, if you don't own any EMA, buy a little on the dips. In a serious correction, EMA will drop but it will bounce back and pay you for your patience.
IPL may be a personal favourite but I would hesitate to recommend it. It has a dividend payout ratio of 109%. I've seen worse, much worse, but such a high ratio gives me reason to pause. I only hold 200 shares and I won't be buying more any time soon.
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