Good morning everyone, I hope you all had a good weekend. I am good and healthy, I hope all of you are as well. I hadn’t planned on writing a post today however my portfolio received some bad news that I thought I would share with you. This morning Inter Pipeline (ticker: IPL) announced they were going to be cutting the dividend by 72%. This news wasn’t a shock, I expected it to happen.
Here is some measures Inter Pipeline is taking to response to the pandemic.
- Dividend reduction of 72%
- Suspension of the Premium Dividend and Dividend Reinvestment Plan
- Suspension of the European Bulk Liquid Storage sales process
- Expense reductions including compensation adjustments for management and the board of directors
- Exploring partnership opportunities on the Heartland Petrochemical Complex
The company pays a monthly dividend of $0.1425 and beginning on May 15th to shareholders on record as of April 22nd the new dividend will still be paid monthly at a reduced rate of $0.04.
I currently hold 309 shares of Inter and with this reduction I am going to be losing $380.07 in income. Normally when a company cuts their dividend I sell, however in these uncertain times I am willing to be a little for forgiving as I believe this was the right thing to do for them, going into the pandemic the payout ratio was quite high.
Do you own shares of IPL if so do you plan on selling your shares, hold or buy more?
Thanks
Matthew
Generally agree with the cut and the suspension of the sale process for the European bulk liquids storage business. No sense divesting of profitable business lines at firesale prices in the midst of a pandemic, nor does it make sense to take on debt just to continue paying a dividend.
I was heartened to see that the Board of Directors are cutting their own compensation, and that Heartland can apparently now be self funded. They also revealed they are in talks to take on a minority partner for the project, which is very positive from a risk management perspective.
But no way around this, it definitely sucks in the immediate term, even if I think it was the right move for the company.
John
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Thanks John I agree with you on everything you said.
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I think it would be wise for all companies to suspend dividends temporarily because we’re in a consumer spending crisis. People stopped working and stopped spending. So it doesn’t make any sense for all those companies to continue paying dividends when the money is not coming in. REITs will have to do the same thing. If they won’t receive rent money, they won’t be able to pay shareholders. Taking on the debt would be very unwise at this point. I think you new the cut was coming, but you did buy new shares at a great price!
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