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Dividend-payers Norbord, Pembina going strong
11/18/2018 9:44:05 AM
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Wealth Builder
Gordon Pape writes on common-sense wealth-building strategies.



By Gordon Pape  | Monday, October 22, 2018


 

BUILDING WEALTH WITH GORDON PAPE
 

These are not good times for income-oriented investors. Rising interest rates have put downward pressure on many high-yielding stocks, reducing the market value of their portfolios. The dividends are still being paid. But people are getting edgy as they see the price of their shares pull back. No one likes a shrinking portfolio. Fortunately, there are a few dividend stocks that are bucking the trend. Here are two that were recommended in my Income Investor newsletter.

Norbord Inc. (TSX: OSB). Norbord shareholders received a pleasant surprise recently when the board approved a special stock dividend of $4.50 for shareholders of record as of Sept. 1. Not surprisingly, the share price jumped on the news.

The announcement came after the company posted the best second-quarter results in its history with adjusted earnings of $167 million ($1.92 per share, fully diluted) compared with $95 million ($1.10 per share) in the same quarter last year. The company reports in U.S. currency.

Norbord manufactures oriented strand board (OSB), which is used in home construction. It is a cyclical company that is currently benefitting from high prices and strong demand for its products. CEO Peter Wijnbergen says that is expected to continue.

“Given the positive outlook for OSB demand in North America and Europe driven by continued growth in the construction and renovation of homes, as well as meaningful growth in industrial end-uses and export markets, Norbord is well positioned to continue to return excess capital to shareholders, including through share repurchases,” he said.

But a word of warning. This is a boom-or-bust company. Right now, it is going through a boom phase. But as recently as March 2017 the quarterly dividend was only $0.10 per share, and the stock was trading at around the $30 level. So, if you own the stock, enjoy the ride for now, but be prepared to sell at the first sign of a slowdown in home construction.

Pembina Pipeline Corp. (TSX: PPL). The company recently released strong second-quarter results that drove the price higher despite the headwind of higher interest rates.

All the numbers were impressive. Revenue came in at $1.9 billion, up from $1.2 billion in the same period of 2017. For the first six months of the fiscal year, revenue was $3.8 billion compared to $2.6 billion the year before. The acquisition of Veresen last year was a major contributor to the revenue growth.

Earnings were $246 million ($0.43 per share), up from $117 million ($0.24 a share) in the second quarter of 2017. For the first six months, Pembina earned $576 million ($1.02 per share) compared with $327 million ($0.72 a share) the year before.

“We are seeing strong customer demand for our services, leading to higher volumes and increased utilization in the Pipelines and Facilities Divisions, combined with rising commodity prices which drive solid performance in our Marketing business,” said CEO Mick Dilger.

The monthly dividend was increased by a penny in May, to $0.19 per share ($2.28 per year).

My Income Investor newsletter rating on this stock is a buy, as I see it as the best choice in the pipeline sector right now. Consult your financial advisor before making a decision.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.

Notes and Disclaimer

© 2018 by The Fund Library. All rights reserved.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.

 
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