Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF) has been a member of the Canadian Edge Portfolio since the inaugural July 2004 issue. And it’s rewarded us with a total return of nearly 400 percent.

Much of that return has been from the generous monthly distribution, which the company has increased five times since my initial recommendation. And last year Pembina converted to a corporation, absorbing new taxes without cutting its distribution.

Pembina shares, however, have also consistently moved higher over that time. And they’ve now more than doubled off their March 2009 low.

That’s all great news if you already own the stock. But the higher Pembina and other big winners go, the harder it is for me to answer the question of whether they’re still values.

For the past few months my view has been that Pembina wasn’t worth paying more than my target of USD22, though it was worth continuing to hold. This week, however, the company has released first-quarter numbers and guidance on several key projects that justify a raise from that level. My new advice: Buy Pembina Pipeline up to USD25 if you don’t already have a position.

This doesn’t mean those with already large positions in Pembina should lever up by over-weighting. That’s never a good idea with any single position. Any business can be hit with an unexpected setback, no matter how good it looks. But Pembina does now definitely appear to be well worth a USD25 price.

Though it’s now a corporation, Pembina has stuck to a dividend policy pegged to cash flow. That makes sense, given its cash flow is principally from the very steady business of owning and operating fee-generating energy infrastructure, mainly pipelines and related assets.

Even in 2008, when oil prices dropped from over USD150 a barrel to less than USD30, Pembina’s revenue and cash flow never wavered. That adds up to an extraordinary level of revenue and cash flow reliability only a handful of companies can match.

As a result, the bottom line number for profits to watch is what management calls “cash flow from operating activities.” The first-quarter number came in at CAD0.45 per share, which covers the monthly dividend of CAD0.13 per share–CAD0.39 on a quarterly basis–by a solid 1.15-to-1 margin.

The other number of interest is “adjusted earnings before tax,” which is basically cash flow less capital spending, including for the company’s growth ventures. These were CAD0.34 per share in the quarter. That’s a coverage ratio of 0.87-to-1. But it also reflects the extraordinary level of capital spending going on at Pembina–including an 11-fold first-quarter increase–that will boost future cash flows.

Adjusted earnings per share were up 9.7 percent from the year-earlier period. Cash flow from operations was also 9.7 percent higher. That’s a good sign the existing business is performing well also. Those numbers reflect a solid 11.7 percent increase in revenue, marked by steady growth at all four business segments.

The midstream and marketing segment, which basically leverages opportunity at the company’s energy infrastructure assets, saw a CAD7.2 million boost in revenue. The other three segments focus on infrastructure in three key areas of rapid growth in Canada: oil sands/heavy oil, natural gas/natural gas liquids (NGL) and light oil. Pembina reported strong progress adding cash-generating assets in all three.

Revenue from conventional pipelines (45 percent of profit) rose 7 percent and profit ticked up 2.1 percent, reflecting solid throughput. Oil sands revenue was up 6.3 percent and margin was flat. Midstream and marketing profit rose 43.6 percent, and gas services saw a 3.5 percent revenue boost.

Why Raise?

All of these numbers figure to get a mighty boost in the second half of 2011 from new projects coming on stream. And therein lays my primary reason for boosting Pembina’s buy target.

In oil sands/heavy oil segment the company has now completed work on its Mitsue Pipeline, which has diluent delivery capacity of 22,000 barrels per day over a combination over some 160 miles of infrastructure. Nipisi is 90 percent complete and on track for startup in the third quarter of 2011; it consists of roughly 120 miles of heavy oil pipeline with capacity of 100,000 barrels per day.

The projects are set to meet internal budget projections and will generate a projected CAD45 million of annual income, backed by long-term contracts. Both have the potential to more than double capacity with regulatory approval, likely as Canada continues to ramp up the output from the tar sands. And because capital costs are incurred up front with such projects, the cash will flow right to the bottom line.

As in the US, Canada’s natural gas producers are suffering from the depressed price of dry gas, but realizing a windfall from soaring demand for natural gas liquids. NGLs can substitute for petroleum products in a wide range of processes and products, and are far cheaper as well.

Pembina’s new ethane extraction facility is on track for startup in October 2011. The project utilizes the company’s existing right-of-ways and infrastructure, keeping costs low even as it adds a projected CAD12 million to CD15 million in additional operating margin. It will also feed into the company’s existing conventional pipeline network, raising throughput and therefore toll income.

As for light oil, new directional drilling technology has unlocked Canada’s Cardium formation, ramping up producers’ spending in the region. Here the company is realizing growth by boosting capacity of its existing asset base. Pembina has spent CAD15 million of a planned CAD40 million build-out, with incremental cash flows expected early next year. And there are multiple opportunities for similar low-risk projects as the region’s light oil is increasingly unlocked.

The bottom line is Pembina is uniquely positioned to build energy infrastructure assets in all three major areas of production growth in Canada. And the bigger it grows by adding new projects, the more financially and technically able the company will be to grow even more. That means rising cash flows and eventually higher distributions.

At the current price, Pembina shares yield roughly 6.5 percent. That’s much lower than in previous years, reflecting the rise in the share price. Coupled with the fact that the dividend is paid in Canadian dollars and monthly, however, it’s certainly competitive with the best of the US master limited partnerships specializing in energy infrastructure. And, unlike US MLPs, Pembina provides a way to play the growth of Canada’s oil sands output, both through new projects and existing relationships with Syncrude, with whom it has a contract that runs through 2035, and Canadian Natural Resources (TSX: CNQ, NYSE: CNQ), with whom the company has a contract through 2032.

The downside for Pembina is basically another 2008-style crash in the economy, which will drive down the price of oil, the Canadian dollar and the Canadian market. Even then, however, the company’s conservative financial management ensures its dividend won’t be affected–there’s no significant debt maturity until 2017 and capital projects are fully financed–just as it wasn’t in 2008. Buy Pembina Pipeline up to USD25 if you haven’t already.

Here are the rest of the CE Portfolio companies left to report first quarter profits and when to expect them. I’ll have Flash Alerts analyzing the results as they appear.

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–Jun. 9 (confirmed)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 30 (confirmed)

Conservative Holdings

• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–May 31 (estimate)
• Capstone Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Jun. 10 (confirmed)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Jun. 8 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Jun. 2 (confirmed)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)– Jun. 7 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Jun. 14 (confirmed)