Altagas Ltd (ALA.TO)

An 8% dividend yield – Ask yourself why. The reason is that the company has been jacking up the dividend, increasing debt and issuing stock over the last few years. The dividend is talking to you. They really should be paying down debt. Buyer beware.

Sustainable long-term cash flow. True, its charts are unflattering, but it's grown its dividend 50% over the past fve years. It continues to be on sale, so he continues to recommend it. It's a bargain now and the most recent drop is egregious. The market has been negative on the WGL acquisition, but utilities in metropolitan areas (Washington DC) with solid, long-term growth don't come up often. Cities will always utilities. Their cash flow will sustain the 8.8% dividend. You're paid to wait. He's buying for clients. (Analysts' price target $28.10)

(Past Top Pick on Oct. 3, 2017, Down 8%) They basically got their WGL deal approved yesterday and now have four approvals, though there's one more later this week. They've done everything they promised--they got their approvals and he's confident this deal with close. They need to announce some asset sales to shore up the funding plan. It got hit in the last quarter when they took some power assets off the market in California. Compared to say Enbridge, ALA has so many assets and so much cash flow. He belives they will find a buyer for those assets and this stock move higher. This stock is cheap now and they pay a big dividend. Now is a good entry point. The WGL deal is accretive. Dividend of 8.8% is safe and can even grow it a few years. The chairman owns a lot of stock.

They did some major missteps in the last year and a half. They were already facing some hurtles. The acquisition has still not closed, being held up by regulatory approvals. Buy the sub-receipts at a discount and then if the deal does not work you get the higher face value back. Also the acquisition is not as interesting as it was when it was initiated because of changes in US tax rules. We will know more over the next month or two. They are the .R version of the security.

All these energy infrastructures have come down. Distribution is high and probably sustainable. He likes what he sees here but not one that he actively covers.

It does not have much earnings support. However the price of oil is oozing slowly higher. He hopes soon it will 'energize' the oil patch. The problem is that they are paying out more than they are making. Unless there is a big recovery in earnings, they are going to have to cut their dividend fairly soon. They do not have a powerful balance sheet.

The whole sector has pulled back and ALA is interest rate-sensitive, too. The big WGL acquisition in the U.S. will remain an overhang until later this year when/if approval is granted. Prefers Pembina and Enbridge.

He loved how the company has done the transformational acquisition. They have taken on a lot of debt, but in a low interest rate environment. He did sell out thinking there was a 20% risk of real inflation and the company may not be able to sell assets to pay for the acquisition.

They are in the process of acquiring WGL Holdings in the US and believes the final regulatory approval from Maryland should eventually come. It appears they are in the penalty box until they successfully digest this sizable acquisition. He does not particularly like this name.

Be cautious and don't shop for dividend stocks in general. Play defence with names like this. Can't speak to ALA's dividend which is above 9%. Generally speaking, take profits and rotate into other sectors and be conservative. With ALA, wait and see. They are broadly based in Alberta, so be even more cautious.

Owns the receipts. Management blew it. If they sell their crown jewel to finance this deal, then the stock will get chopped. If they walk away, the stock will rise a little to the $31 receipt level, perfect for him. Three years ago they bought Californian assets and recently couldn't sell them. Managament has disappointed, and destroyed value. He hopes activist investors or regulators get involved to break the deal, so ALA can get out.

High yield that is sustainable. Some non-core assets they are looking at to sell to reduce the leverage. Dividend is sustainable.

if you buy for the yield, then you won't get much else. If the yield doesn't rise, then inflation will grind away at it. Who knows when the WGL deal in the U.S. gets done, if it does? Doesn't see stock price appreciation. No downside protection here either. So, he'd rather buy its bonds.

Problem is their acquisitions: major U.S. one with a lot of debt. The pending deal with WGL Holdings is weighing on the stock. Not worried about the high dividend above 9%.

Your first reaction with seeing the 9% yield is that it's in trouble. ALA is awaiting US approval of the
WGL utility deal, carries a high debt and was unable to sell a holding recently. But he believes the deal
with go through and ALA will sell off assets to reduce their debt. This is an opportunity.