Altagas Ltd (ALA.TO)

The technical picture does not look good. It is in a downward trend and not showing signs of support. It is underperforming the market.

He used to own this, but sold it about a year ago. His concern was on valuation and interest rate sensitivity. This does midstream natural gas processing in Western Canada. Involved in a very large transaction to buy WGL Holdings in the US for about $6 billion. The market doesn’t like the transaction and the stock traded down quite sharply when they announced the deal. This company paid way, way more in dividends than their earnings. Also, the stock is quite expensive.

This has done very well, going from the roots of a little utility, a little bit of gas distribution and gathering, to a North American utility. The stock price has been depressed lately, because they did a big US acquisition which is still waiting for regulatory approval. He believes it will come through. You will be rewarded if you are holding the stock. Dividend yield of 7.2%.

Has looked at this recently. You could buy the Receipt instead of the common shares right now, because it is trading under the strike price. If the deal doesn’t go through, you get your money back. There is so much healthy scepticism, in that the 7% return might be a flag. A hybrid company, half power and half utility and trying to grow like some of the others into the US. He would wait for the day of the deal, but you have to be nimble.

This stock has been pretty weak. It is in the middle of the pack on price momentum, and valuation is not cheap either. The balance sheet is okay and you have a great yield. However, you are paying a pretty good price of 20X EV to EBITDA for a company that doesn’t have price momentum.

One of those stocks that has big generous dividend yields. Seasonally, from now through to the beginning of September, it rises about 6% on average, with a 7% dividend yield. It looks like a good trade. Technically, it resisted at its 200-day moving average in mid-May, which raises warning flags from a long-term trading perspective. However, from a shorter-term trade, there might be reason to be optimistic. You want to play this for the yield. If it stays stable and the market stays flat to negative, which it does seasonally, you are still going to have a good trade here.

Thinks this will continue to tread water. They are digesting the WG Washington Gas/Light US acquisition. This has cleared shareholder approval, but now they are waiting for the regulators. Pays a nice yield of 7%, and he believes that the dividend is safe. Doesn’t see a lot of action coming because of regulatory uncertainty. However, this company is pretty well postured in energy markets, not just in Canada, but also in California. The cash that is going to come from that will keep the company in good stead. It is more like a utility than it has ever been and WGL will make it even more like a utility.

(A Top Pick July 25/16. Down 4.62%.) Confused as to why it hasn’t done better, so he just keeps buying more stock and collecting the 7% yield. The dividend is also going to grow this year. He likes their acquisition.

Infrastructure companies are the least sensitive group to the price of energy. While energy has been weakening over the past few weeks, energy infrastructure names have been doing quite well. Not the strongest name in the Canadian market. It has a 7% dividend yield, and he wouldn’t be betting on that. There are better places to be.

He hates saying you get paid to wait. He likes ETFs so you are diversified. It looks like ALA-T is in a trading range. You could nibble away at it if you like the dividend, however. Sell at $35.

Planning a big US acquisition and will take on a lot of debt. The market seems worried that they can’t beat the index by owning this over the next 18 months. It looks like they should be able to do the acquisition. The dividend yield is 6.9%, which he gets up front. If he is trying to beat an index, this is not good, but if he is just trying to make money, this is fantastic. (Analysts’ price target is $35.)

Subscription Receipt. This is a regulated utility. They made a big acquisition in the US. They issued these subscription receipts which pays a 7% dividend. If the deal falls apart, you get your money back. If the deal doesn’t close in a year, you get $31 plus your 7% dividend yield.

The payout ratio in the last quarter was less than 50%, using a cash flow valuation basis, the correct metric to use. They acquired WGL Holdings, which hasn’t closed yet, so they still have receipts outstanding. The dividend is nice. They’ve also said that the accretion to cash flow is very, very strong from the acquisition, so they are actually forecasting dividend increases going forward. There is a good opportunity here for income investors. It should be trading at a lower yield and higher price than what it is right now. Dividend yield of 7%.

He doesn’t like this one. It closed at $30.08. His model prices $22.21, a negative 25%. It is an earnings issue. The dividend is $2.22, 7.38%, but it is only earning $.91 with $.99 forecasted for 2018. Paying way too much in terms of their earnings.

He likes this because of their assets. It might not go anywhere for the next 6 months, but over the next 2-3 years, their EBITDA and cash flow generation gives them a growth profile for utilities, which is quite unique.