Pembina Pipeline Preferred Shares: A Steady Hand in Rocky Markets

In the energy sector's current storm—where oil prices lurch and interest rates whipsaw—Pembina Pipeline Corporation's preferred shares (PMMBF) are a rare oasis of predictability. With a recent dividend declaration of CAD 0.282 per share (a slight dip from prior years but still robust) and a 7.41% trailing yield, these securities are quietly outperforming expectations. Let's dig into why income investors should take notice—and where the risks lie.

Dividends: A Bumpy Ride, But Still on the Road

Pembina's preferred shares, specifically the Cumulative Preferred Series A 21 (PMMBF), have faced headwinds. The dividend dropped from CAD 0.394 in late 2023 to CAD 0.282 in June 2025—a 28.5% decline. But here's the key: this cut isn't arbitrary. It's part of a deliberate strategy to preserve cash amid a sector-wide squeeze.

While the drop stings, Pembina's preferreds still outperform many energy peers. The company's focus on stable cash flows—bolstered by long-term pipeline contracts and a 6.302% fixed-rate structure until 2028—gives investors a lifeline in volatile markets.

Why the Dividends Hold Up (Mostly)

1. Infrastructure Fortitude: Pembina's pipelines are the backbone of Canadian energy transport. Even as oil prices fluctuate, demand for infrastructure remains steady. The company's 5.2% annual yield (on some series) is a magnet for retirees and income funds.
2. Capital Discipline: Pembina suspended its Dividend Reinvestment Plan (DRIP) in 2017 to prioritize balance-sheet strength. The payout ratio of 0% (per data) suggests dividends aren't tied to volatile earnings but to fixed-rate obligations—a safety net in tough times.
3. Debt Management: The issuance of subordinated notes and share buybacks (when prices dip) shows management is actively managing liquidity. This isn't just about dividends—it's about survival in a sector where rivals are cutting payouts entirely.

The Case for Buying Now

Preferred shares like PMMBF offer two key advantages:
- Low Volatility: These securities are less sensitive to oil price swings than common shares. The beta of 0.7 vs. the S&P 500 means smoother returns.
- Yield Dominance: At 7.41%, the trailing yield blows away the 10-year Treasury's 4.3%. For income investors, this is a no-brainer—if you can stomach the risks.

Red Flags: Don't Get Burned

• Interest Rate Risk: Preferred shares act like bonds—rising rates hurt prices. If the Fed hikes again, PMMBF's price could dip, even if dividends stay steady.
• Energy Dependency: A prolonged oil slump (say, prices below $60/barrel) could force further dividend cuts. Pembina's 2025 results will be critical.
• Complexity: With multiple preferred series (PMMBF, PPL.PF.E, etc.), investors must parse terms like redemption dates and fixed-rate periods. A misstep here could mean holding a “called” share at a loss.

Bottom Line: Buy the Dip, But Stay Alert

Pembina's preferred shares are a hold for income portfolios—if you're willing to accept moderate yield erosion. The next dividend on September 1, 2025 (CAD 0.282) is a sign that management is prioritizing continuity over growth.

Action Items:
1. Dollar-Cost Average: Buy PMMBF in chunks over the next three months to mitigate rate risk.
2. Watch the Oil Price: Below $65/barrel? Consider scaling back.
3. Compare Series: PPL.PF.E (the CAD 0.405 dividend) may offer higher yields but shorter-term stability.

In a sector littered with dividend cuts, Pembina's preferreds are the Energizer Bunny of payouts. But don't mistake resilience for invincibility—these shares thrive in stability, not chaos.

Final Verdict: Hold for income, but keep a close eye on energy markets.

Data as of July 2025. Past performance ≠ future results. Consult a financial advisor before investing.