Alaris Royalty Corp (AD.TO)

Alaris has been a past top pick and at current levels, it could be again. After a few years of investments that didn't perform as expected, they're finally seeing some settlements. Expect to see more capital deployed, like last year when they invested $85 into one company. Dividend is safe. Happy to hold it. Would not be surprised to see this stock return to past levels in the next few years.

Likes their business model, which is royalties. They go into businesses that need help and capital. Instead of selling common shares or getting high lender debt, this company will structure some kind of a royalty deal that will give them a high coupon and first rates to different things. Pays an 8% dividend, and has a well diversified portfolio. However, competition in this kind of business is increasing. He’s not very bullish on their business plan right now, and wouldn't buy this yet. Higher interest rates would put a bit of a strain on their business. Stay away from this for now.

Looking a lot better than the last time he spoke about it. They were getting squeezed into a corner where they were losing on some investments. Didn't have a whole lot of cash, debt was higher, and the payout was looking tight. Recently came out with a press release, saying current investments were resetting their distributions, so there is more cash flow coming in from the reset. Also going to invest more money into 2 of their current investments, which will increase cash flow. If all this goes through successfully, they are expecting to take the payout ratio to just below 90%, a decent payout ratio for cash flow generator like this. Also announced they are going to be increasing the dividend if this final investment goes through. He would consider taking a half position until they finalize the closing of that final investment.

He would put this in the so-so category. This year one of their largest investments got taken out. They made another investment, but also have 3 or 4 investee companies that are not doing so well. They are starting to deal with that, but investors are basically saying they are going to look at this company when all their problems are solved. Investors are also worried about the 8.5% dividend. He doesn't think it will be capped, but wouldn't call it 100% safe either. A very well-run company that is going through a problematic period of time. They earn 15%-16% royalties on their investment, and you don't get that type of return without some risk. Unfortunately, they hit 3 or 4 problems all in a short period of time.

You have to have a lot of faith as to where you are getting the royalty income. You have to have a lot of confidence in what they are investing in. Some of them have not worked out and some have been spectacular. He has a small holding.

Invests in a diversified range of private companies in North America. A number of their investee companies ran into problems, and at the same time, they got into a dispute with the CRA. It's been a long work-out with a number of these companies, and a few are still outstanding, but most things are beginning to settle and stabilize. Some of the investments have been renegotiated and are beginning to contribute to cash flow again. The main point is that they are beginning to deploy capital again in a very significant way. This has limited downside, but great potential upside. Dividend yield of 8.6%. (Analysts' price target is $23.)

They announced a $50 Million write down. This was a big hit and drove the stock down. They also had a number of royalty resets. He thinks the write downs are a onetime event.

This is having a hard time being on the right side of a new release. Went through some litigation, and results were not quite as stable as had been expected. They are having to deal with a few of their companies going into default. They are managing, but now the payout ratio is getting really tight, and they don’t have a lot of cash on the balance sheet. If they have more issues with some of the loans they have, they could run into problems with their payout. He would sit on the sidelines for now.

He likes the company. Feels management has a good strategy in place. A diversified company with a lot of holdings. They have a good strategy of letting the companies grow. 8.8% dividend yield.

Has fallen to its lowest level in a year, as a result of a Q3 loss. What surprised the market was the write-down they took on an investment. Most people thought they were going to continue to work it out and get something resolved. Going forward, most people are looking for them to continue to clear the decks for underperforming investments they've had, and the next step is what they are doing with new investments. Thinks the market is watching to see the new investment they did 3 months ago, and if the next one is the same rate and, if a trend, are they investing at lower rates than in the past, and if it's private equity big money, the effect on businesses. He is just watching to see what they do with the next deal where they deploy capital, and what rate it's at.

(A Top Pick Dec 21/16. Down 5.77%) The last two years have been difficult. A lot of that is behind them now. They’ve recently made some large investments and he expects to see good results over the next year. The stock is still depressed and he expects to see fairly significant dividend increase going forward.

There have been a lot of moving parts on this one. They have had a long track record of doing this. They did fairly well as a private company. They have a diversified portfolio but some partners have run into financial difficulties. Their due diligence is being questioned. It has been staying in a trading range. He thinks you will see resolution of a couple of outstanding issues plus they will add a couple of new partners in the near term. Longer term it is a business with a nice dividend.

Has looked at this over the years, and never thought they charged enough for their product. They hold about a dozen investments and collect a royalty off of that. He would be very cautious on this. If you own, you might consider taking your money off the table.

This has been really timely and topical of late, because of a short report that came out, where they were called into question on what they were doing, which was followed by them announcing their biggest royalty deal yet. Over the last 18 months, it had a number of their royalty payments that haven’t been too successful. It has been a little slower than what the street would have liked.

Over the last 2 years, this company has had its share of setbacks, but most of that seems to be getting worked through. Recently one of the companies that provided a large chunk of their cash flow has redeemed, and people have been wondering what they are going to do. They’ve made the largest capital deployment in their history with the Sales Benchmark Index, which is a large consulting firm. That is going to go a long way. The key is that they put money into private businesses at a certain rate and then pay the dividends through to shareholders at a slightly lesser rate. Feels we are now going back on a path where there are going to be dividend increases going forward. Dividend yield of 7.7%. (Analysts’ price target is $24.)