Capstone Infrastructure (CSE.TO)

They hold Bristol Waters in England, and there was a ruling from the regulator for the next 5 years, that was far less than expected. They are going to have to put more money in and get less of a return. In spite of this, the company is saying their dividend is secure, so he is happy to hold it. The turnaround will take longer. Also, had trouble with their Cardinal plant last year and the settlement was not the greatest. Also, has some projects coming online in 2015-2016.

A great payout. It is at 130%, however and that is a danger signal. Management is quite happy with this and seem to think they can continue to pay it. He thinks the stock could double. But you have to be careful of high payouts and high payout ratios. There may be safer places to look, but he is comfortable with it at this time.

Has owned this for a long time. They continue to pay a really good dividend. Has a great operational management team. A solid company. His target is $4.50 a year out. Mostly co-generational wind power. He is not concerned about the dividend.

This is still building a base and you are not going to get hurt. Currently in a trading range and he expects it will do this for a while. You may have to have patience.

Has dropped to just over $4 and is yielding over 7%. He likes this company. One of the smaller infrastructure companies that has quite a diversified number of operations such as power, water, heating, etc. Their water facilities that they run in Bristol England are interesting.

In the past they have cut the dividend which hurt the stock price. That is when he bought in. Currently the payout is at 65%. It is possible it will go above 100%. If it does that, that is a danger zone. The company has already indicated and telegraphed that. They feel they can continue paying out even more than 100%. Management is smarter now than they used to be. They have been expanding and just got a loan for one of their new projects. He thinks it can double from here.

Bought this because he thought they would come to an agreement with the Ontario power Authority for their Cardinal cogeneration plant. They got a 20 year agreement, but he still doesn’t know how good it is. It is going to hinder their cash flow. Payout ratio is about 60%, and because of the cash flow drop, it could go over 100%. Increasing things in their Bristol water plant in the UK which is developing well. Management is becoming smarter over time. There are companies being taken over in this field right now and infrastructure is reasonably hot. Initial Sell Target is $8.74. Dividend yield of 6.77%.

Remains on his Buy list. Doing a good turnaround. One of the major dangers is the deal they did with the Cardinal plant. It has about $30 million in cash flow going to Capstone. That is going to drop to about $10 million, and is really going to hurt them. Payout ratio is going to jump as much as 100%-120%. If that happens, a lot of investors are going to be scared out. In the past they have been forced to cut their dividend, but believes they won’t have to. Thinks there is a potential for a double on this.

Recently sold his holdings at around $4.05. Originally thought the stock would get re-rated once they re-contracted the Cardinal facility. That has been done so that headwind is behind them. At this time, it is really a growth by acquisition vehicle. They need to diversify their portfolio which he thinks they will do. Dividend is safe.

Didn’t have a deal to extend their deal with Ontario Power Authority. They’ve signed a deal, but it is not the one that they wanted, but it is pretty reasonable. The deal helps the dividend going forward. He can see the stock doubling. A lot of the potential is in a takeover. They keep adding new properties. Yield of 7.17%.

Mostly wind power. His target is $4. Likes the yield. Thinks that at some point this will get taken out.

Have a plant called Cardinal in Ontario and the terms of their contract with the Ontario Power Authority was just until the end of the year. Just announced a new 20 year agreement, which helps to assure a certain amount of income, which should help to ensure the dividend. Over the past number of years, this company has typically over promised and under delivered. Yield of 7.52%. Possible takeover target at some point.

Thinks management is overpaid. Stock price has gone down about 40% over the past few years. Doesn’t understand how the Board of Directors get the money that they get. However, they have some good assets. One they are working on is Cardinal, a cogeneration plant. One of their goals was to come to an agreement with Ontario Power Generation on a new contract. It should have been done by now but they still have time before the contract expires. He sees an upside of over $8.

Stock plummeted when they cut the dividend in half. They can sustain the payout even with a contract running out. 8.2% yield.

Have one of the most diversified groups of power, including gas, wind, Hydro and biomass. They own 50% of the Bristol water utilities so they are geographically diversified. The big worry is that their big 150 MW power plant in Ontario is PPA (?) with Ontario power and it expires next year and they haven’t renewed yet. That would be 15% of its earnings. 7.8% yield.