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Purchase IPL

|About: Inter Pipeline Ltd. (IPPLF)
Summary

Used newest contribution, proceeds from sales and dividends to purchase a new position in IPL.

Interested in adding new position to the pipeline market in Canada, IPL appears to be well situated, is trading at a discount (as are all pipelines).

Future catalysts for both entities, plus a high dividend amount and low payout ratio, allow for a income and growth position.

I decided that I would initiate a new position by taking a small portion of each of my investments to add to this new position in Inter-Pipeline (OTCPK:IPPLF). Despite my high weighting in Village Farms it is the only position I did not reduce to allow purchase. 

As most are likley aware the entire pipeline industry is on sale right now, hopefully near peak pessimism in the market about their overall prospects. In the case of Inter-Pipeline they are well positioned as a pipeline with quite a substantial book of business, however they have decided to grow into the refining business. They have begun a massive project to bring refinery capacity into the Canadian market, using the substantially discounted prices from Alberta to refine and manufacture raw plastics for sale in the region. 

Although there are concerns from some that this will stretch the company, the litany of new projects coming online should ensure adequate cash flow to sustain the capex required to get the project off the ground. 

As I was research pipelines there are many branching into other areas (the other major consideration was Enbridge (ENB) and their move into electricity). 

By my logic Inter-Pipeline's new project is the perfect complement to the pipeline business. If the environment turns back towards pipeline's (more environmental disasters from rail-car accidents for example) the increased pipeline capacity should be a promising growth catalyst for their substantial pipeline business. 

On the other hand if the environment stays decidedly anti-pipeline a business that can benefit from the large spread between regionally suppressed prices and higher refined goods prices will benefit for decades. As such this looks like a promising entry into Canadian refinery capacity. 

In the meantime we get a well covered dividend to help ease the volatility that will likely come over time. 

For those following my other articles, IPL (Canadian ticker) is now 13% of the overall portfolio, with an approximately even decrease in all holdings aside from Village Farms which has stayed the same. 

Disclosure: I am/we are long IPPLF.

Additional disclosure: I am long IPPLF on the TSE under the ticker (IPL). I am also long VFFIF and other holdings which can be read in my full articles.