Sustainable dividends from Canadian and international companies set to meet spiking demand for liquefied natural gas.
The screen
Global demand for LNG is set to rise by a whopping 60 per cent over the next 15 years, according to a report released this week by energy giant Shell PLC. The company identifies customers in Asia, especially in Japan and China, as a key growth driver.
Natural gas is produced around the world, and the simplest way to transport it is through a pipeline. But that gas can also be cooled into a liquefied form and transported by tanker, allowing Canada and other supplying nations to meet demand overseas.
Canadian operations, such as TC Energy’s Coastal GasLink pipeline and the LNG Canada facility coming on stream this year in B.C., are primed to meet that demand.
Still, they will face competition. On his first day back in office in January, U.S. President Donald Trump signed an executive order ending a Biden-era moratorium on new LNG export permits from that country.
Our search started with a list of Canadian and other companies 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:
One point for five years of continuous dividend payments – two points for more than five;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.
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 nine stocks. 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. Its newly minted Coastal GasLink pipeline is key to Canada’s efforts to expand LNG exports to Asia through the LNG Canada facility at Kitimat, B.C. It’s set to come online later this year. Note – Shell PLC SHEL-N, also headquartered in London, holds a large stake in that LNG facility. It, like BP PLC BP-N (another London-based giant), is one of the world’s leading natural gas and LNG suppliers.
ARC Resources Ltd. ARX-T, with its head office in Calgary, is contracted to supply natural gas to the LNG Canada facility as well as the planned Cedar LNG plant, also in B.C. In addition, it has a long-term supply agreement with Cheniere Energy’s Sabine Pass facility. 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. California-based Chevron Corp. CVX-N has a large and growing LNG portfolio of its own, including import and export terminals. Texas-based Exxon Mobil Corp. XOM-N owns interests in several LNG projects across the world, including part of Australian’s Gorgon LNG project. 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 supplier.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.