3 Reasons Pembina Is Hands Down The Best Monthly Dividend Stock You Can Buy For 2020 by Brad Thomas

in syndication •  last month  (edited)

via @leo.syndication:


"Summary

  • PBA is a Canadian corporation, meaning that it pays qualified dividends (no K-1) in Canadian dollars.
  • There's also a 15% tax withholding to consider, for taxable accounts. Due to a tax treaty between Canada and the US, this doesn't apply to retirement accounts.
  • For taxable accounts, there's a tax credit that can recoup all of the withholding amount.
  • Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »

This article was co-produced with Dividend Sensei and edited by Brad Thomas. We recently decided to add Pembina Pipeline (NYSE:PBA) to our monthly-paying coverage (along with Broadmark Realty (NYSE:BRMK) - see article here).

Monthly dividend stocks are a great way to pay the bills, which is why they are so popular among income investors. The trouble is that most monthly payers are in riskier industries or asset classes such as CEFs or BDCs.

We aren't interested in yield traps that cut their dividends during recessions (i.e. - CBL article here), but only in recommending quality income paying stocks you can rely on in all economic and market conditions.

As part of that promise, we want to offer a deep dive on Pembina Pipeline, one of the safest midstream and monthly dividend stocks few people have heard of.

Pembina Total Returns Since 2004

(Source: Portfolio Visualizer) portfolio 1 = PBA

That's a shame because even factoring in the longest midstream bear market in midstream history, Pembina is a proven master of compounding both safe income and wealth over time. That includes doubling the market's returns over the past 15 years, all while delivering a utility like 75% less volatility over time.

So, let's look at the three reasons why 5.2% yielding Pembina isn't just a very strong buy today, but hands down the best monthly dividend stock you can buy for 2020 and far beyond.

Reason 1: A Great Recession Resistant Business Model That Makes For Very Safe Dividends

Midstream is all about the dividend, which means the first thing investors need to consider is the stability and recession-resistance of its cash flow.

(Source: investor presentation) - pro forma to include Kinder Morgan Canada assets

Pembina is a mini-version of Enterprise Products Partners (EPD), with a vertically-integrated midstream infrastructure base that's focused primarily on the Alberta tar sands (the Texas of Canada). Like Enterprise, Pembina has its finger in virtually every part of the energy supply chain"

...Originally Posted On Seeking Alpha

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I held this stock for a bit a while back I believe. Big fat dividends are always fun.

I wrote about Pembina a couple of weeks ago,

https://steemleo.com/steemleo/@rollandthomas/is-pembina-pipeline-a-great-dividend-stock

Thus, although Pembina is a decent dividend company to own, I put Pembina on my watch list because I was mixing up Dividend payout ratio and the Cash Dividend Payout Ratio. But in the case of Pembina, their cash dividend payout ratio is .34 which is really, really good. Thus, I have to agree with Brad on this one.