Earlier this week, Keyera (TSX:KEY) reported a formidable fourth-quarter efficiency, driving report financials for 2023. Boosted by its stable efficiency, the corporate’s inventory value has elevated by over 1.93% since reporting its fourth-quarter earnings. Regardless of the latest improve, it nonetheless trades at a reduction of over 4.4% in comparison with its 52-week excessive. So, let’s assess shopping for alternatives in Keyera by its latest efficiency and progress prospects.

Keyera’s fourth-quarter efficiency

In the course of the December-ending quarter, Keyera generated an adjusted EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) of $339.2 million, a 59.7% improve from the earlier yr’s quarter. In addition to, its distributable money flows elevated from $104 million to $234 million. The robust performances throughout its three segments – Liquids Infrastructure, Gathering and Processing, and Advertising – drove its financials.

In October 2023, the Calgary-based midstream firm accomplished the development of the KAPS (Key Entry Pipeline System) pipeline. It would transport pure fuel liquids (NGL) and condensate from the Montney and Duvernay basins to the corporate’s liquids processing and storage hub. Amid the enlargement, the corporate has added 40 million cubic toes per day of capability, which is totally contracted underneath long-term agreements and operates at full capability.

All in all, the corporate’s monetary place seems stable, with its web debt-to-adjusted EBITDA standing at 2.2 by the tip of the quarter. It was decrease than its steerage of two.5 to three. Additional, it had $1.1 billion of liquidity as of December 31. So, the corporate is well-equipped to fund its progress initiatives. Now, let’s have a look at its progress prospects.

Keyera’s progress prospects

Keyera operates a low-risk midstream enterprise, with round 65% of its money flows generated from long-term fee-for-service and take-or-pay contracts. Its built-in excessive barrier-to-entry belongings generate wholesome money flows whereas maximizing its margins. Given its stable underlying enterprise, the corporate has been rising its discounted money flows/share at a CAGR (compound annual progress charge) of 8% over the earlier 15 years. So, its underlying enterprise seems stable and is much less prone to market volatility.

Additional, the corporate has allotted $80 to $100 million for progress capital expenditures this yr and $90 to $110 million for upkeep capital expenditures. In addition to, the enlargement of its KAPS has added round 30,000 barrels per day of long-term dedication for its Liquids Infrastructure phase, with a median contract time period of 12 years. In the meantime, the administration expects round half of those volumes to start out contributing from halfway by this yr and can ramp up till 2029.

Additional, the corporate has added round 33,000 barrels per day of fractionation commitments to its KFS (Keyera Fort Saskatchewan), with the weighted common life of those contracts at 13 years. Bolstered by these progress initiatives, the corporate’s administration expects its adjusted EBITDA to develop 6 to 7% by 2025 whereas retaining its advertising and marketing phase fixed. So, the corporate’s progress prospects look wholesome.

Buyers’ takeaway

Earlier this week, the U.S. Labor Division introduced that the patron value index rose 3.1% in January, increased than analysts’ expectations of two.9%. In addition to, with the expectation of world progress slowing down this yr, I count on fairness markets to stay unstable within the close to time period.

So, buyers ought to strengthen their portfolios by including shares with stable underlying enterprise and wonderful dividend progress information. Supported by its steady money flows, Keyera has raised its dividend at a CAGR of 6% since 2008. KEY inventory at present pays a quarterly dividend of $0.50/share, with its ahead dividend yield at 6.1%. Its payout ratio stands at 49%, decrease than its 50 to 70% steerage. Given Keyera’s stable fourth-quarter efficiency, wholesome progress prospects, excessive dividend yields, and engaging ahead price-to-sales a number of of 1.2, I’m bullish on it.