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Major Oil Pipeline Operators Plan Higher Dividends

The major North American pipeline operators Kinder Morgan and Enbridge issued upbeat updates to the market on Tuesday, planning higher dividends and expecting more profits next year, after the challenges the oil industry has faced this year.  

Enbridge raised on Tuesday its quarterly dividend by 3 percent to US$0.65 (C$0.835), effective March 1, 2021. This is the twenty-sixth consecutive year in which the oil and gas pipeline operator has increased its common share dividend.   

"For the 26th consecutive year, we're pleased to be providing our shareholders with another dividend increase in 2021. This reflects our confidence in our healthy 5-7% DCF [distributable cash flow] per share growth outlook, on average, through 2023 and beyond, the priority we place on returning capital to shareholders, and our strong financial position," Al Monaco, President and CEO of Enbridge, said in a statement.

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"We're highly confident in the durability of our businesses and that they will generate profitable investment opportunities. Part of that is continuing to position for the gradual transition toward lower carbon intensity, over time," the executive added.

Last week, Enbridge started construction on the Line 3 oil pipeline replacement in Minnesota after receiving all necessary approvals and permits.

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Kinder Morgan, for its part, announced on Tuesday its expectations for its financial performance next year.

The company expects US$1.2 billion in net profit for 2021, after a slim US$100 million net income expected for this year. The small 2020 net profit will be due to hefty impairments the pipeline operator has made throughout the year.

Kinder Morgan also expects to raise its dividend for 2021 by 3 percent compared to this year. The company expects the board to declare a Q4 dividend of US$0.2625 per share or US$1.05 annualized. The board expects the 2021 dividend to be US$1.08 per share annualized, or a 3-percent increase from the 2020 dividend.

"With budgeted excess coverage of that dividend, we expect also to be able to engage in share repurchases on an opportunistic basis," Kinder Morgan Inc's chief executive officer Steve Kean said.

By Tsvetana Paraskova for Oilprice.com

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