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Investors love Pembina Pipeline Corporation (NYSE: PBA). The dividend stock is soaring, and every income investor wants in. With its next earnings announcement set for August 8, let's dive deeper into …

Investors love Pembina Pipeline Corporation (NYSE: PBA). The dividend stock is soaring, and every income investor wants in. With its next earnings announcement set for August 8, let's dive deeper into this love story to decide whether this company is a keeper – or just another crush.

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  • 1. 3 Reasons Investors Love Pembina Corp.
  • 2. Dividend Pembina Pipeline Corporation is not your normal dividend stock. It's distributed $2 billion in dividends since it listed in 2010, and currently dishes out distributions every single month. Its annual payout has gone from $1.56 per share in 2011 to $1.645 in 2013, a steady but not unreasonable increase. While some corporations get caught up with keeping distributions in line with soaring stock prices to keep yields steady, Pembina Pipeline Corporation has seen its annual dividend yield whittled away from nearly 6% in 2011 to 3.7% today. But in the same period, investors have enjoyed a doubling of share value. Source: Credit Trevor Littlewood
  • 3. Dividend
  • 4. Steady and Growing Earnings Pembina has been around since 1954. The company has learned a lot of lessons in the past sixty years, and has increasingly positioned itself to control every step of its supply chain, from gas and oil fields to production, pipelines, and eventual storage. That level of infrastructure means Pembina is, at least within the oil and gas sector, a price maker rather than a price taker. That point shines through in its above-average 13.6% operating margin and 7.4% net profit margin, as well as its consistent earnings growth for investors. In the past decade, through the worst of the Great Recession, Pembina has only seen adjusted earnings per share (EPS) pick up.
  • 5. Steady and Growing Earnings
  • 6. Future Prospects Pembina Pipeline Corporation's Q1 2014 EBITDA (earnings before income, tax, depreciation, and amortization) hit an all-time record high of $316 million as operations improved and new assets paid off, but the company isn't sitting on its cash. Just four days after its latest earnings report, Pembina announced $460 million in new capital expenditures to build a 55,000 barrel per day (bbpd) gas processing plant and pipeline in Alberta, Canada. Along with other under-construction projects, Pembina will push its capacity from 73,000 bbpd today to a whopping 228,000 bbpd by Q3 2017.
  • 7. Future Prospects In total, Pembina expects to spend $1.5 billion on capital expenditures in 2014 – a 56% boost over 2013 spending. And since Pembina's pipeline-centric model allows it to seal long-term deals with customers before construction projects even start, the company isn't making a bet it can't afford. Pembina has agreements with over 30 different customers, eager to grab their chunk of new capacity as Canada continues to face fuel transportation bottlenecks. Source: Wikipedia Commons
  • 8. What's Not To Love? Pembina seems to be the perfect fit for any income investor. With a dynamite dividend, excellent earnings, and future growth prospects, there's a lot to love. Pembina Pipeline Corporation brings in the sort of consistent "toll booth" revenue that makes dividend stock investors salivate. But toll booths don't always work. Investors should be aware of regulatory risks that could dry up demand for gas transportation, "clearing the roads" of all toll booth traffic. The company's vertical integration affords it excellent diversity within its sector, but prevents it from looking much beyond.
  • 9. What's Not To Love? Likewise, if gas loses out in competitive markets to an alternative like coal, nuclear, or renewable energy, Pembina could find itself with a dwindling list of long-term contracts. Energy supplies and technological improvements are the two aspects to keep an eye on here. Either could push or pull prices in a direction Pembina would prefer to avoid. Source: Pembina Pipeline Corp.
  • 10. Diversify Your Dynamite Dividends With This IRS Loophole