Chemtrade Logistics Income Fund (CHE.UN.TO)

Industrial chemical business, and one he likes quite a bit. It has a good stable yield. It is also one of these yield stocks that doesn’t trade on the spread to the 10-year. They have a hostile takeover offer on Canexus (CUS-T), which will be accretive if they can get it. (See Top Picks.)

(Market Call Minute.) A good little company that is paying a good sustainable dividend. You are getting about a 6% distribution which is nice. Not a lot of catalysts for growth right now. They are talking about maybe buying Canexus (CUS-T). You buy it while there is not a lot of growth because that catalyst is going to come at some point.

He used to hold this in one of his funds, more for the yield of 6.8%. Cheap on a Price to Book basis. A fairly stable stock. Price momentum has come off a bit, and he hopes that doesn’t continue, but will give it a little bit more time, just on the yield basis.

The chemical business isn’t a bank, so there is a little bit more risk and are more economically sensitive. He models a payout ratio of about 60% for 2017. Trading at about 6.1X 2016 estimated price to cash flow, versus 8.25 for a five-year average. Doesn’t really see any EBITDA growth for the next couple of years. You will just be getting paid the sustainable .8% dividend yield, which is okay.

This scores in the upper quartile for all 3 rankings, price momentum, valuation and volatility. Trading at 1.5X Book, 20X PE with a yield of 6.7%. A little heavy on the debt side, but seem to be able to cash flow that.

Likes this and the dividend, which he thinks is sustainable. Feels it is gaining some good ground back, so he stuck with it and will continue to hold it. A good, steady dividend payer and a well-run company.

Sulphur products and high performance chemicals. When the rules changed for income trusts in late 2006, this company went through the exercise of how much it would cost to change their structure, and decided to keep it the way it was. Have operations both in Canada and the US. Dividend yield of 6.9%.

(Top Pick Apr 20/15, Down 11.46%) It is in his income model. It is a 5.5-6% dividend. Longer term it is reasonably stable.

(A Top Pick Dec 18/15. Down 5.53%.) Still holding this in his income portfolio as the dividend is fantastic. However, Sold it out of his growth portfolio. On a long-term chart, the stock has come into a reasonable level.

(A Top Pick Feb 6/15. Down 22.98%.) Their base business was originally specialty performance chemicals around sulphur. About 2 years ago they made an acquisition in the US which got them into water treatment in a bigger way, as well as some specialty chemicals for the food and pharmaceutical industries. Had competition that was disrupting the market, which has been taken care of. Also, had some refineries that were having down time, reducing demand for some of their chemicals. Very well-run. Payout ratio of about 58% and are paying down debt with their cash flow. He continues to add to his position.

Q4 is going to be slow for them. They are having larger than normal every 5 year upgrades. This is a chemical company in a tough time, but they do have a stable resilient business model, backed by risk sharing agreements. Pretty good products and good geographical distribution. He sees a low payout ratio of 55%.

(A Top Pick Nov 19/15. Down 5.37%.) This is a pretty defensive stock. He tends to like this anywhere from $15-$16 and it has a pretty strong technical resistance point around the $20-$21 point. Has very long support at around $15-$16. It is in the range where it tends to bounce off, and he expects it to get in the $20 area and he will Sell. Has about a 7% yield.

(Top Pick Feb 6/15, Down 9.25%) Refinery was down for maintenance. They are doing what they said they would do and he is continuing to hold it and would buy more. 53% payout ratio.

This is coming off the bottom of a trading range. It gives you about a 6.5% yield right now, plus the stock has almost always found support level at around $17. Currently it is building at a few higher lows. Thinks it could get back up to the $20-$21 range. He is looking to trade it out at around $19.50-$20.

(Top Pick Feb 14/15, Up 2.60%) It has been a tough market. It is a very stable business. They will continue to do tuck-in acquisitions. 6% yield.