What are we looking for?
Sustainable dividends from companies gearing up to meet rising demand for liquefied natural gas (LNG).
The screen
Pembina Pipeline Corp. PPL-T recently signed a 12-year agreement to provide Ovintiv Inc. OVV-T with 500,000 tonnes a year of gas capacity at its 49.9-per-cent-owned Cedar LNG facility in B.C. Pembina will do the same for Malaysia’s Petronas, providing it with one million tonnes of capacity annually for 20 years.
The agreements provide Ovintiv and Petronas with a new export outlet for their Canadian natural gas, which is converted to LNG before being shipped by tanker. Export from the West Coast of Canada offers the shortest shipping distance to Asian LNG markets of any North America terminal. The deals also create a stable, long-term revenue stream for Pembina.
Worldwide demand for LNG continues to rise, largely driven by economic growth in Asia (especially Japan, China and South Korea) and energy-thirsty artificial-intelligence infrastructure.
Natural gas is produced around the world, and the simplest way to transport it is through a pipeline. Still, the gas can be cooled into a liquefied form and transported by tanker.
Our search started with a list of Canadian, U.S. and global firms supplying, processing and ultimately shipping LNG. We then applied our TSI Dividend Sustainability Rating System to a short list of income payers. It awards points to a stock based on key factors:
- two points if it has raised the payment in the past five years;
- one point for management’s commitment to dividends;
- one point for operating in non-cyclical industries;
- one point for limited exposure to foreign currency rates and freedom from political interference;
- two points for a strong balance sheet, including manageable debt and adequate cash;
- two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
- one point for an industry leader;
- one point for five years of continuous dividend payments;
- two points for more than five.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated 11 stocks.
Ovintiv Inc., based in Denver, but with a considerable presence in Calgary, is a major producer of oil and gas. Calgary-headquartered Pembina Pipeline Corp. operates pipelines and more in Canada and the United States.
Cheniere Energy Inc. LNG-N, based in Houston, is a leading U.S. LNG producer and one of the largest global producers. The company operates two export LNG facilities along the U.S. Gulf Coast: Sabine Pass and Corpus Christi.
BP PLC BP-N and Shell PLC SHEL-N, both headquartered in London, are among the world’s leading natural gas and LNG suppliers. They also operate sizable LNG shipping fleets.
Natural gas pipeline and power plant operator TC Energy Corp. TRP-T, based in Calgary, has strong cash flow and growth projects to keep dividends rising; that includes major supply deals with big U.S. LNG export plants. It has also completed its 670-kilometre Coastal GasLink pipeline, which is pumping natural gas from northeastern B.C. to LNG Canada’s new export facility in Kitimat, B.C.
ARC Resources Ltd. ARX-T, headquartered in Calgary, is contracted to supply natural gas to both the LNG Canada facility and the planned Cedar LNG plant in B.C. It also has a long-term supply agreement with Cheniere Energy’s Sabine Pass facility.
California-based Chevron Corp. CVX-N has a large and growing LNG portfolio, including import and export terminals. It also holds interests in major LNG projects, including Australia’s huge Gorgon LNG facility. Texas-based Exxon Mobil Corp. XOM-N owns interests in several LNG projects across the world, including part of Gorgon LNG, as well as plants in Papua New Guinea and Qatar.
Golar LNG Ltd. GLNG-Q, headquartered in Bermuda, engages in LNG shipping, as well as developing liquefaction projects. And finally, Australia’s Woodside Energy Group Ltd. WDS-N led the development of the LNG industry in Australia. Today, it’s a major global LNG supplier.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.