Inter Pipeline Ltd. (TSX:IPL) is an interesting company from the standpoint that this business is much more diversified in some ways than its competitors - in addition to owning a stable of energy infrastructure assets transporting different grades of crude oil, the company engages in natural gas production and has a liquids storage business in Europe which is often forgotten by investors.
As with other energy infrastructure companies, Inter Pipeline has seen its share price languish of late, reflecting sentiment within this sector that has turned very bearish in a short amount of time.
Some of this sentiment is warranted, given the changing macroeconomic environment and a lack of appetite for high-yielding equities at this point in time. As we are currently in a rising interest rate environment, high-yielding securities such as energy infrastructure companies and utilities have generally been avoided by investors, as increasing yields inherently reduce the attractiveness of such investments over time.
Inter Pipeline, like other energy infrastructure companies, has also engaged in a series of acquisitions in recent years which, while adding to the company's diversification and cash flow generation potential over the long-term, also added to the company's debt load, a debt load which will become less attractive to investors given rising interest rates and the fact that IPL may be forced to borrow at higher rates to continue growing via acquisition in the near to medium-term.
In my mind, the jury is still out on Inter Pipeline, however I will be following this company closely, given its yield which is approaching 8%.
Invest wisely, my friends.
