Inter Pipeline Ltd. (TSX: IPL, OTC: IPPLF) reported credible fourth-quarter results, with funds from operations per unit (FFO—an estimate of cash flow) up 13% from a year ago. The dividend per share was 4% higher.

The business performed well at the operating level, with the star performance coming from natural gas liquids (NGL) processing, where higher volumes, better margins, and the inclusion of the Williams Canada NGL business resulted in a 160% increase in profits.

The European bulk liquid storage facilities operated at almost full capacity and delivered a 3% increase in profits.

Oil sands pipelines, which comprise the largest division, produced slightly higher profits after the acquisition of an additional working interest in the Cold Lake pipeline during the quarter.

Debt levels increased during the year in part to finance the Williams and Cold Lake acquisitions, as well as to fund some modest capital expenditures. The debt-to-capital ratio is somewhat elevated, at 57%, though the company still enjoys an investment-grade credit rating from the main agencies.

Capital expenditures continue to drop as the multi-year expansion program comes to an end. However, Inter Pipeline is considering the development of propylene and polypropylene production facilities at an estimated cost of over $3 billion. A final investment decision is expected by mid-2017, with an expected in-service date in 2021.

These facilities could pose a risk to dividend growth during the four-year development and construction period, since the company will need to take on significant debt to fund the projects before they begin generating new income.

With a growing dividend and forward yield of 5.7%, Inter Pipeline’s shares remain attractive even though the stock is nearing our estimated fair value of C$30, or US$23.

There’s light at the end of the tunnel for Finning International Inc. (TSX: FTT, OTC: FINGF), as the company saw fourth-quarter adjusted earnings per share improve by 20% year over year. The dividend remained unchanged.

Finning has been working hard to align its cost base to the weaker operating environment and succeeded in lowering operating costs by 7% during the year.  

While fourth-quarter revenue fell slightly from a year ago, the magnitude of declines has been decreasing, with better prospects for 2017.

The company’s balance sheet remains in good shape, with a debt-to-capital ratio of 32% and investment-grade credit ratings from DBRS and S&P.

Our outlook for the company remains somewhat subdued since mining and energy companies are not rushing to increase capital spending, even with improving commodity prices. However, we have seen the worst of this cycle and expect much better results in 2017, albeit from a low base.

The strong balance sheet and reasonable cash flow should ensure a stable dividend, though the next dividend increase probably won’t happen until 2018.

The market is already discounting a full recovery for Finning and the stock has moved up strongly from its early-2016 lows. Shares of Finning currently yield 2.9%, and we estimate the stock’s fair value at C$26, or US$20.

Suncor Energy Inc.’s (TSX: SU, NYSE: SU) recovery gained momentum during the fourth quarter as the company bounced back from weak energy prices and the Fort McMurray wildfires.

Cash flow from operations per share jumped 58% year over year, as both production volumes and energy prices improved. The dividend per share was increased by 10.3% compared to last year.

Crude production reached a new quarterly record of 739,000 barrels of oil equivalent per day, mainly as a result of the increased working interest acquired during the year in the Syncrude operation, as well as the better production efficiencies achieved there.

Management continues to maintain tight control on costs, with oil sands cash operating costs declining 11% year over year, to $25 per barrel. Syncrude operating costs were also 19% lower than a year ago.

The refinery division delivered good operating results, with funds from operations up 19% thanks to higher product sales and steady utilization rates.

During the year, Suncor sold its Petro Canada lubricants division for $1.12 billion. This divestiture will reduce future profits for the refinery and marketing division.

The balance sheet remains in sound condition, with a debt-to-capital ratio of 28% despite a $3.2 billion increase in debt during the year. Cash flow improved significantly during the second half of 2016, as volumes and product prices recovered.  

We are holding Suncor in the Dividend Champions Portfolio for its ability to sustain its dividend during commodity down cycles and boost its dividend during up cycles. So far the company has not disappointed, and we were pleasantly surprised by the recent dividend increase. However, prospects for further dividend growth are largely dependent on energy prices.

Suncor has a forward yield of 3.1%, and we estimate the stock’s fair value at C$40, or US$31.

TransCanada Corp. (TSX: TRP, NYSE: TRP) reported that fourth-quarter adjusted earnings per share jumped 17% year over year. The dividend was increased by 10.6%. 

However, it’s worth noting that profits were adjusted by $870 million, as per the acceptable accounting standards. Without the adjustments, the company reported a loss. The main adjustment came from a write-off on the U.S. Northeast power business, which has been sold to partly finance the acquisition of Columbia Pipelines.

Many companies make adjustments to accounting profits to reflect the actual performance of their underlying business, but this adjustment is especially large and follows on the heels of a third-quarter $656 million goodwill write-off on the sale of the Northeast power assets, a C$2.9 billion write-off on the Keystone XL project, and a $176 million impairment charge related to the cancellation of the Alberta power-purchase agreements.

The U.S. natural gas pipelines division grew adjusted EBITDA (earnings before interest, taxation, depreciation, and amortization) substantially following the inclusion of the Columbia Pipelines business. Profits from the other main natural gas pipelines varied, with the Canadian lines contributing slightly less, but a sharp increase in profits from the Mexican lines.

The $13 billion acquisition of Columbia Pipeline Group was completed during 2016. TransCanada issued equity and increased its debt levels considerably to finance the acquisition.

TransCanada will have a different profit breakdown in 2017 as a result of the Columbia acquisition and the sale of the Northeast power business. The contribution of natural gas pipelines will grow to over two-thirds of profits, while power generation’s share will decline to around 15%.

The company will also have its work cut out to raise around $32 billion over the next three years to fund capital expenditures, pay dividends, and conclude the $915 million acquisition of Columbia Pipeline Partners.

Regular cash flow will contribute more than half of the funding, but TransCanada will have to turn to the capital markets for the balance. The company intends to maintain its investment-grade credit rating in the process.

Should the previously shelved Keystone XL project eventually get off the ground, the capital requirements would increase by another US$8 billion.

The debt-to-capital ratio is already high, at 62%, and the dividend could be at risk if interest rates rise considerably over the next few years.

The stock had a good run in 2016, and the valuation discount to its peers has now closed. The well-covered dividend still yields a reasonably attractive 4.1% on a forward basis, and management is forecasting further dividend growth of 8% to 10% annually. We estimate TransCanada’s fair value at C$59, or US$45.

Earnings Season Checklist

We’re now firmly in the midst of earnings season for the calendar fourth quarter. While we do not have any particular insights into what the quarter will offer, we’re reasonably comfortable that our Dividend Champions will either maintain or increase their dividends.

The table below lists the date for each company’s earnings release, as well as the expected dividend. Please note that some dates have yet to be confirmed and are, therefore, based on the timing of past reports. Rows that have been highlighted green indicate companies that have already reported results.