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Peyto Exploration & Development Corp. (PEY)
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Brookfield Infrastructure Corporation Class A Exchangeable Subordinate Voting Shares (BIPC)
Q: BIPC has had a good run lately, do you see much more near term upside with the dividend tax credit changes? I’m thinking to switch into PEY for the greater yield and more upside once we get a change in federal gov. Also I like the ability to write some covered calls.
What are your thoughts on this trade, and do you have any insights on timing?
What are your thoughts on this trade, and do you have any insights on timing?
5i Research Answer:
BIPC has done well recently, partially due to the favourable macro environment of declining interest rates, which is a tailwind for leveraged businesses like BIPC. We think over the long term, BIPC will continue to be a high-quality, stable dividend grower.
On the other hand, PEY is largely an oil and gas name. PEY is much more cyclical, and the performance depends largely on commodity prices. We don’t think it is an apples-to-apples comparison. For investors that are seeking dividend income, we would keep BIPC, but for investors that are looking for exposure to the energy theme with some upside potential from the movement of oil prices, then switching some to PEY makes sense.