Opinions James Hodgins
Diversified Royalty CorpDIV.TOBUYApr 29, 2019
Their payout ratio is around 85%, high but safe, because they're growing into it. Mr. Lube is putting them into Walmarts in Canada, which has generated tremendous growth. He owns their convertible debenture and likes this company. 6.7% yield.
James HodginsOwned
$3.25
Stock price when the opinion was issued
Financial Services
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BUY
The management team has done a fantastic job over time. People were concerned how long they could pay out their dividend and people worried about how diversified their royalty streams were. Now they invested in Oxford Learning for diversification. Their dividend payout is now below 100%. (Analysts’ price target is $4.29)
Financial Services
COMMENT
Likes it but the market is concerned about the 7.8% dividend. They still have cash from a sale of a division. They need a new royalty stream to uphold the div.
Bruce Campbell (2)Owned
Financial Services
COMMENT
18-24 months ago they stumbled with a restaurant royalty, but are doing well with a new royalty concerning a muffler business at Walmart. But this will be cyclical in a downturn. The dividend is safe now.
Financial Services
DON'T BUY
He does not own it currently. They acquire royalties from other companies to distribute. Payout ratio is over 137% of cash flow, which is unsustainable in his mind. Earnings growth is expected at 15% this year and 20% next year. He still thinks it will be challenged to keep the dividend. Yield 7.7%
Financial Services
WAIT
Why is the price dropping? He respects the CEO and has long owned DIV. The founder thought the restaurant-royalty business and understands it very well. He's looking for more opportunities in this space. The sell-off is due to DIV's payout ratio, which is slightly over 100. This could change if a new opportunity arises and therefore push down that ratio.
Bruce Campbell (2)Owned
Financial Services
RISKY
HOLD
These yield plays do well in the summer when cyclicals (and risk-off stocks) are out of favour. Now, investors are very defensive. DIV has been gaining during current seasonal strength (since late-2018). It's been rangebound the past year, though its above its 200-day moving average. Resistance at $3.15. He's not excitied by this, but it is holding.
Financial Services
COMMENT
DIV-T vs AD-T He owns Diversified. He likes their management team and it pays a good dividend. He waits to hear how management will deploy their capital going forward, but likes how management has been prudent with it. The yield is enticing. Alaris has stumbled as of late. He prefers DIV-T.
Peter ImhofUnknown
Financial Services
HOLD
Pays a nice dividend. The stock had been coming off. They were supposed to have signed some royalty deals, but haven't in 18 months. He prefers that they take their time and be careful, but eventually they need to sign in order to lower their payout ratio. This should do okay during the current market downturn.
Peter ImhofOwned
Financial Services
