Altagas Ltd (ALA.TO)

The dividend is sustainable. They did an acquisition in the US. The market did not technically like it because of equity issue, but he things it is transformational and incredibly accretive. It will take about 18 month for the process to go through and for them to close the deal. It is cheap and you will see it outperform next year. Their assets are incredibly strong.

6.8% is a pretty high yield. If the outlook for Nat Gas is going to be suppressed for the next couple of years then the dividend is at risk.

The deal has not closed yet, but the company has indicted the deal is accretive to cash flow. It is not a dividend he is particularly concerned about. It is a solid company with a solid history and dividend.

This looks attractive. It has pulled back after its large acquisition of WGL Holdings. Pays a 6.9% dividend, and management expects the dividend to continue increasing by about 8%-10% for the next 4-5 years. At today’s price, in 2021, the dividend would be 10%. There is no way it will continue trading at the current price with that kind of a dividend, so there is upside from here. He believes the dividend is sustainable.

Chart shows a big, big resistance at around $30. If the recovery is credible, the stock should be much higher. The chart indicates that it keeps trying to go lower, which is not a good sign. This is bearish and might go lower. Don’t be deceptive by the 7% yield. You could lose it in 2 days.

Sold his holdings about 2 months ago. Payout ratio is 56%, reasonable within the utility part of their business. Earnings grew 75% as of October 20, and are forecast to decline by 19% when they report in February. Overall earnings for the year is forecast at $.99, and a slight decline to $.97 in 2017. Free cash flow growth is negative. He would prefer other stocks. Dividend yield of 6.7%.

They just made a very large acquisition. He owned it until just before they announced the acquisition. They pay a big dividend by borrowing and raising equity to fund it. Look at their cash flow statement and you may decide it is not as blue chip as you think.

Sold his holdings in late summer of 2016, to make room for more procyclical exposure in the portfolio. There has been a notable corporate development in the last couple of months. They are in the throes of their largest acquisition in the history of the company with WGL Holdings, a very large cross-border transaction. It should be 8%-10% accretive to both earnings and their fund flow from operations. Management feels it will support dividend increases in an 8%-10% annualized pace over the next 3-4 years, without impairing credit. The stock is quite expensive, and he views it as a bond proxy, which he tries to avoid. 6.7% dividend yield.

Good management team. 6%-7% annualized dividend growth over the last 5 years. 7% growth on a 7% yield is a big number. He likes this company for yield focused investors. Acquiring WGL Holdings, a Washington-based utility in Virginia. Has faith in the management team to pull the acquisition off. Dividend yield of 6.72%. (Analysts’ price target is $35.44.)

Subscription receipts or common stocks? Subscription receipts started trading last week, and trading at least $1 below the stock. These basically turn into stock once the acquisition of the Washington utility gets approved. That might take a year. If the deal falls through, you get your money back. During that year, you actually earn the dividend on that receipt. He would probably play this through the receipts. He worries that a Canadian company can go into the US and outbid all the US companies, and basically pay more for the asset. What worries him more is that with the new Trump regime, what are they going to do with intercompany debt.

They are paying out more than they are earning. He does not look at cash flow vs. dividend. He looks at earnings. He advises against looking at cash flow.

An Alberta utility with some gas pipelines and processing. Buying a Washington DC based utility in Virginia, 2000 miles apart. It is going to take them a year or more for them to sort through all the regulations. Looks like it is accretive. They’ve raised the $2.5 billion externally, and it all went through quite nicely. It doesn’t seem like a natural fit to him. This has a great yield of about 7%.

As the infrastructure company that it is, overall it is good. He would take this opportunity to pick up a little.

(Top Pick Dec 1/15, Up 9.95%) There was no growth and it was at 7% yield. You can double your money in 10 years. It is still 6.5% and they incrementally added little businesses. Today they announced $170 Million in expansion. This stock is still being penalized.

(A Top Pick Jan 22/16. Up 9.17%.) This has energy and infrastructure. Mid-streaming was their original business. Also, has power in Canada and the US as well as some regulated utilities. Very well-run. 6% dividend yield.