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Q: I have been watching KML. My portfolio is a bit mixed up these days, and could probably use a little more diversification within my dividend plays (weighted heavily in Banks at the moment). At 4.5% yield, this looks like a decent play, and it feels like there is upside potential with the share price, with limited downside (assuming the Pembina deal stays on track, as the company has said). I like the stability of their income, and it looks as though they have "taken their lumps". How do you guys feel about KML these days?

Thank you in advance


Read Answer Asked by Don on October 25, 2019

Q: Hello 5i Team

The market has announced a takeover of Kinder Morgan Canada by Pembina Pipeline. The deal indicates that holders of KML will receive 0.3068 shares of PPL per 1.0 KML shares.
The Pembina news release indicates the value of the KML shares for the deal is $15.02 and the Kinder Morgan Canada news release indicates the value for the KML shares for the deal is $15.12.
The current price for PPL this morning is approximately $49.00 and the current price for KML is approximately $14.77. Therefore KML is trading slightly below the offer price ($49.00 x 0.3068 = $15.03). The deal is not anticipated to close until 1rst quarter of 2020.
I own both PPL and KML, however in separate accounts.
Based on today's prices, PPL is yielding 4.8 % and KML now yields 4.3 % (down from 5.9 % prior to merger announcement).
The deal does not indicate whether KML will continue to pay dividends in Nov 2019 and Feb 2020. Is this correct?
Should I sell my KML today and reinvest in a completely different security (I do not wish to own PPL in the account I held KML in) or wait until the merger occurs and then sell the PPL shares I receive).

Read Answer Asked by Stephen on August 22, 2019
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