Ross HealyAtlantic Power Corp.ATP.TOCOMMENTSep 23, 2014

They generate electivity and sell it. As we move in this direction this company will have a foothold and niche. It is a capital intensive business and interest rates rising will be a problem.

He does not like it. They cancelled their dividend. You expect one from a utility. The share price is down about 10% this year. Things are improving, but he does not recommend it.

Return on capital went down to 1% and is now hovering at 3%. It is not as strong as other utilities so he would stay away from it.

It seems to find support in the mid-$2s. It has failed to break out. There is good support at $2, but he would not be that hopeful that it is heading back up. He is semi-bearish.

When you look at the earnings forecast for the coming year, minus 37%, even the dividend they are paying now doesn’t cover what they are paying out. What concerns him is the long run balance sheet trend back to 2011, which is in a downward slope. It doesn’t have a particularly robust balance sheet and is paying out too much in dividends and selling at BV right now.

Verizon (VZ-N) or Atlantic Power (ATP-T)? He would go for Verizon which gives you more security of income. This company cut its dividend in half, and there is never just one dividend cut usually.

Their merger and sale is off the table. They slashed their dividend to $0.12. He thinks that there is no way that they can do any developments and there is no free cash flow after the dividend. His call is that this should be a $2 stock.

Downgraded on the first dividend cut and now they did it twice. Negative on earnings growth potential as well as on management. The cash flow is enough to support the bond so he would not be worried about them.

They have slashed the payout and are now trying to sell themselves. The stock price has just plummeted. This is the problem with these former income trusts with very high payout ratios. In the end you have to ask is it well covered and what is the percentage that is being paid out.

This company has really turned the corner. Likes the stock, but it is too small for him. He gets participation through Emera (EMA-T), which is a big shareholder. They are doing the right kind of things, playing the niche markets and the renewables. 9.4% yield is sustainable as the company grows into it.

This one is very tempting, but he doesn’t think the dividend yield is sustainable. As of Q1, the dividend was 3X higher than the free cash flow. Doesn’t think there will be a buyer for them.

Debentures? He thinks this company will likely survive. Have a tremendous debt load. The debentures traded below par for good reason. There is a lot of risk out there. Doesn’t know if they have been well-managed in the past few years. Right now they are trying to work their way out of their problems. If you are looking to buy in, debentures would be the route to go. Not on his Watchlist.

Sold his holdings, but has been buying their convertible bonds. They are trying to get themselves sold. Have money in the bank. There is a lot of uncertainty as to where management is taking the company. 9.6% yield, but this might get cut. Have a convertible bond that is maturing in 2019, which he thinks is just perfect.

Seasonality for utilities is just about to start in June. The bottom in February is really indicative of a lot of utility companies. Chart shows a nice nascent trend. If we get above $4, this will usher in a lot of new buyers. Thinks there is pretty good upside potential on this.