Altagas Ltd (ALA.TO)

When a dividend is over 10% like ALA's, you know what the answer is--not bad. Yes, when the WGL assets appear next year, the stock will look better. Today, they spun off the Canadian asset a new Altagas; they likely didn't get the price they wanted, but the deal was at least done and it removes some uncertain. But those Canadian assets are gone, though the WGL assets will now appear. A bit of a wash. Wait another year for them to delever further. Pays a 10.6% dividend.

Owned it for a long time. Then, ALA got into trouble. He's now wait and see with ALA. The market needs to get their head around their earnings and how sustainable their 10% dividend is. Be careful here.

(A Top Pick Nov. 17/17, Down 22%) The trend from March to July broke. He thinks long term he would look at it now if he did not already own it. It will probably act much better in the new year.

If they sell some assets, it would help the balance sheet, he thinks. The company is paying out almost twice what it is earning. The results in the balance sheet melting away. They would do an enormous service to cut the dividend to a sustainable yield, like 5%.

ALA-T vs. ARX-T. ALA-T is going through a reorganization. It complicates his model. The trailing PE is 19 times and it is cash flow positive. The yield is very high at 10.2% with payout at 60%. The ROE is okay at 6%. He would wait until the financing of the spin out is complete and the market should be more comfortable. He does not follow ARX-T.

The market is guessing they will have to cut dividend. They are struggling for capital. He would wait until the dust settles. The risk on the downside is too high if they have to cut the dividend.

He just bought this back as he believes the re-structuring is well along. He is trading it with a tight stop in the “high-teens”. He thinks market analysts are having a hard time categorizing the newly structured company. Yield 10.5%. (Analysts’ price target is $27.41)

(A Top Pick June 14/17 Down 23%) He sold this and bought it back recently. The WPL acquisition made sense to him, but he was not impressed with their financing strategy. As interest rates were looking to go up, he saw better companies who had lower debt levels. He thinks they are most of the way through their financial re-structuring.

When an investor sees a 10% dividend, s/he should understand that the whole world sees the same dividend. The investor should ask whether such a dividend is sustainable. The company has way too much debt and pays out too much cash flow in dividend. The company is a prime candidate for a dividend cut even though its management says it won’t do it. He won’t buy companies that have a lot of debt. Yield 10%.

He's happy to hold this. ALA closed the big WGL deal closed--taking on a lot of debt just as interest rate are rising. They are now selling off minority stakes in some mid-stream assets that'll reduce debt. You're paid while you wait. They raised the dividend. It will compelte building a propane export terminal on the west coat in Q1 2019, which will give ALA a big boost in earnings.He's happy to wait. Underlying cash flow is going up, so the high dividend is
secure. He sees encouraging signs in new earnings streams; a very solid company. Yes, carries a fair bit of debt, but it has the cash flow.

A really tough one. Funding concerns. His cashflow presumptions are pretty good. The deal will close. Doesn’t think dividend will be cut, though market is signalling they might. Be careful. If you own it, you can hold it. Like GE, it will probably be OK.

The company has good assets that produce good cash flows. He believes the market has overreacted to the recent acquisitions and how it is being funded. If this company was trading in the private capital markets, it would be trading a much higher multiple. Yield 10.7%. (Analysts’ price target is $28.23)

(A Top Pick October 3/17 Down 22%) It is a long term game, he thinks. He does not mind holding it while receiving a good dividend. He still has it as a Top Pick. Yield 11%

[Can the stock be saved?] The issue was that the investor base was not convinced with the acquisition decision. They tried to expand with a suitable accretive acquisition but they struggled with financing it. They are doing an unorthodox method to raise capital for an acquisition announced ages ago. The dividend is probably not sustainable. He believes they will probably get this right, however.

The stock is out of favor after the two year wait for the WGL acquisition. They have raised $1.5 billion in shares of the $2 billion they said was needed and now the market wonders if the IPO will make up the difference. All the news is negative currently and he sees less risk now that the stock has fallen. He is betting the dividend is safe. Yield 10%. (Analysts’ price target is $27.79)