Diversified Royalty Corp (DIV.TO)

(Market Call Minute.) This sold off after a weak Q1 due to weak restaurant sales in Western Alberta. Believes their dividend is more sustainable than the street believes. Has been nibbling on this in its weakness. Just under 10% dividend yield, which he feels is sustainable.

A pretty good company, based in Calgary. They are trying to acquire different assets which they can generate free cash flow from in order to pay high dividend yields. Currently it is a very high payout ratio. He is a bit concerned about their latest acquisition which they have potentially overpaid for. Over the long-term, the management team is very smart and really know what they are doing, and will build a good business and continue paying a high dividend yield.

(Market Call Minute.) Probably one that if you hold long term, you will probably do well. Have had a tough time lately with same-store sales numbers out of the restaurant chain, but Mr. Lube has done really well. Expects they will probably make more acquisitions as time goes by.

(Market Call Minute) We will see some good numbers come out of it in the next few weeks. Mr. lube should come out with a record quarter.

This has only 3 investments right now. It is trading on the dividend. Has a pretty high yield right now of 9.7%. He would like to see them do a couple of more deals. An alternative would be Alaris (AD-T) which is not that small, but much more diversified in terms of their investments, and have raised their dividend pretty much every year for the past 5-6 years.

Owns Mr. Lube, Sutton Realty and Fran Works a restaurant group. Fran Works is heavily concentrated in Alberta, so sales are weak. It has driven the stock price down creating a 10% dividend yield. If oil prices continue to improve, even slowly, sentiment will improve. If investors in one year decide that they’ll accept an 8% dividend yield from the stock and the dividend doesn’t change, you are looking at a 35% upside. 10% on the yield and 25% on the stock. They are diversifying away from these 3 royalties. Dividend yield of 9.51%, and he would recommend the DRIP.

(Market Call Minute) They are over-penalized for exposure out West.

Pays a very good dividend because the stock collapsed on concerns of their Western Canadian exposure. They have 3 businesses, Sutton Home Realty, Mr. Lube and some restaurants out West, which is clearly the area of concern. It should be able to comfortably pay the existing dividend. Management has decided to get paid in stock rather than cash, which expresses confidence in their business. 10.5% dividend yield.

(A Top Pick Jan 14/15. Down 12.82%.) Sold his holdings a little higher than where it is now. Great operation and great management team. The majority of their restaurants are in Alberta which is going to affect them. Mr. Lube was a great acquisition and is really going to pay dividends for the stock.

The 1^st royalty this company bought was on a restaurant group that was heavily concentrated in Alberta, and it is still about 40% of their business. They diversified and have a royalty on Mr. Lube, a very, very good franchise. Also, have one on a real estate firm. You’ll see them doing other royalty deals, perhaps before year-end, but certainly sometime in the new year. The CEO wants to move away from Alberta, and once he does that, you will see the multiple improve along with the stock price. Have raised their dividend a few times in the last year. Nice yield of 9.2%.

Has been cynical on this for quite a while. Despite the name, they were a “one trick pony”. Since then they have added 2 other investments including a real estate company and Mr. Lube. Liked their Mr Lube addition and it is becoming more attractive, but it is still only 3 businesses that you are investing in. 9% dividend yield. Prefers Grenville Strategic Royalty (GRC-X).

Likes this company. They have royalty streams from 3 areas, Mr. Lube, Suffield Realty and a bunch of restaurants. Last quarter was weak because the same-store sales from their Alberta restaurants were down. At $2.40-$2.50 it looks pretty darn good.

An interesting stock. They buy royalties on different businesses. They have 3 holdings, a restaurant franchise, Sutton and Mr. Lube, and they get overriding royalties on these. He likes the model of the royalty business and thinks it is very solid. They are going to be able to recycle capital to other businesses, and eventually build a very stable royalty stream. Dividend yield of 8.3%.

(Top Pick Oct 15/14, Up 14.67%) They just announced a royalty agreement with Mr. Lube. This is transformative. There is some headwind because of Alberta exposure through a restaurant chain they have an agreement with. Management thinks the 8% dividend is safe and plan to raise it soon. He hopes they will make an acquisition before year end.

(Top Pick Nov 26/14, Down 1.41%) He still likes the story. The yield is 7.8%. They have three royalty agreements now. They are at the early stages of their growth. He is very comfortable with the companies they have signed. There is some downside protection from their dividend, which they just raised. He is not worried about the dividend.