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Keyera's 8% Yield Offers Sustainable Monthly Income

Published Thu, 17 Dec 2020 12:58:54 -0500 on Seeking Alpha

Seeking AlphaDividend Ideas | Basic Materials | CanadaKeyera's 8% Yield Offers Sustainable Monthly IncomeDec. 17, 2020 12:58 PM ET|| About: Keyera Corp. (KEYUF), Includes: CVX, ENB, ENBA, ENBBF, TRP, TRPEFby: Steven BroderickSteven Broderick Value, Dividend Investing, long-term horizonSummaryKeyera’s 8% dividend yield is almost 1.5X higher than its five-year average.
The company’s payout ratio of 54% in the first nine months of 2020 indicates that the dividend is well covered and is near the lower end of its 50-70%.
Despite weakness in commodity prices, Keyera has grown its distributable cash flow at a CAGR of 9% from 2008 to 2019, ahead of its 10-year dividend CAGR of 7.47%.
Author's Note: All currency reported in Canadian Dollars unless otherwise stated.
Investment Thesis
With a well-covered dividend yield of approximately 8%, Keyera Corp. (OTCPK: KEYUF) offers one of the most attractive dividend yields among the North American midstream corporations. Keyera's business model has shown resilience throughout the latest downturn in the energy sector. The company continues to fund its attractive monthly dividend from operating cash flows while maintaining a modest payout ratio and advancing its capital plan. Keyera's shorter average contract length and commodity price exposure make its earnings more volatile than some of its larger peers. Despite this exposure, Keyera is a quality dividend income opportunity that offers exposure to recovering energy prices.
Company Profile
Keyera is a Canadian-based midstream energy business with operations in Alberta, Oklahoma and Texas. Keyera was founded in 1998 through the consolidation of assets and properties owned by Gulf Canada Resources and Chevron Canada Resources (NYSE: CVX). Over the last 22 years, Keyera has built a substantial network of energy infrastructure assets primarily in Western Canada. Keyera operates in three primary business segments: gathering and processing, liquids infrastructure,... Read more