Diversified Royalty Corp (DIV.TO)

(A Top Pick Sept 24/14. Up 17.73%.) Has done 2 more acquisitions since their Calgary restaurant. These include Sutton Realty and Mr. Lube. They’re always on the hunt for more deals. Has a nice dividend of 7.6%.

These royalty companies are sort of interesting. You have to absolutely trust management. You are sort of buying a portfolio of businesses. They have been making successful acquisitions, and as long as they continue to do so it fits well into her “growth by acquisition” theme. Acquisitions have been diversified. She prefers this over focusing on one industry only.

(Market Call Minute.) Has a good little business plan. Have done really well with diversifying their royalty and getting into businesses that we haven’t seen in the public market before.

(Past top pick, October 15, 2014, up 31.54 %) He has added to it recently. It has been a great ride so far.. It has been doing well in a poor market. Since recommending it has had two royalty acquisitions, they have increased their dividend twice, They have a decent yield of 6-6.5. They have diversified in different areas. They own royalties on a group of restaurants. Closing a deal on a royalty for Mr Lube. They own a royalty for Sutton Group Real Estate..

This was a past top pick and he still really likes it a lot. It has had two royalty acquisitions, they have increased their dividend twice. He thinks he might be able to get a 20% return over the next year.

He looked at this as a possible Short idea. One thing that struck him is that it isn’t actually diversified in spite of its name, it only has one investment, casual dining in Western Canada. So for him, the risk profile is not something he feels very comfortable with, particularly with what is happening in Western Canada. Until it actually becomes diversified, he doesn’t think he wants to hold it. He would prefer Grenville Strategic Royalty (GRC-X), which has about 24 names.

When they start to deploy their cash balance you will see the stock move higher and the dividends increase. They need to make an acquisition. Restaurants are a no-brainer.

Likes this company. Management has a really long history in managing restaurant royalty chains. He is waiting for them to do another acquisition. They have talked about being a multi-business approach, not just restaurants. Expect the market will wait until they add another royalty stream, at which time that will bring the stock price up and the yield down. Yield of 7%.

Royalty stream on restaurants out west. Are negotiating a number of other royalty agreements. Will be a long term good story. A Top Pick previously.

Has been looking at this. The name is a bit of a misnomer. It is not yet a “diversified royalty” as they have only one investment which is in Franworks, a chain of casual diners and bars, primarily based in Western Canada. If you think about some of the macro headwinds facing Western Canada, he is somewhat concerned about their sole investment, so he is very cautious from that perspective. Prefers Grenville Strategic Royalty (GRC-X) instead.

This is in the restaurant business right now, but they are going out and building a multi-royalty stream company. They’ve done their 1^st deal where they bought a royalty stream from the Franworks Company in Calgary. He thinks they are probably going to execute on a few more deals and it is just a matter of time. Raised some cash in the fall, so they have a war chest of cash. Operating costs are all paid for by the Franworks deal, so anything they tack onto the next deal will end up as an increase to the dividend. Dividend yield of 7%.

Still likes this. Have continued to execute on their Franwork transaction. This is not going to be just a restaurant royalty. They have a number of different transactions they have lined up and are trying to close. Have said they are going to be in all different sectors. In the last few sessions the stock dropped a bit and there is no news on why. There may be some concern in the marketplace that royalties could drop if revenues go down. Just did an issue a while ago where they raised some more money, so they are all cashed up and ready to go. The stock will probably get a dividend bump off the next transaction. Has a nice yield.

A new type of royalty company. They are buying top line revenue from companies that have steady businesses. Management own a lot of stock themselves. The 1^st deal they signed was with Franwork, the owners of Original Joe’s and Elephant and Castle restaurants. Trading at a fairly low multiple, and has a 7% yield. They are just starting getting coverage. Expects they will sign another deal in the next couple of months or so. Street is starting to get behind this story. Fairly cheap. Considers this a long-term hold that he can own for the next few years and let it play out.

Acquired a royalty on a restaurant chain out West. The current free cash flow yield is about 8%, and they will start paying a dividend soon. They are planning on acquiring as many royalties as they can and fund a dividend with that. CEO is very smart and was involved in a lot of the restaurant royalties 10-15 years ago, so he knows the business. Likes the cash flow and the yield, and it should hold up well. They have been (unable?) to finance which is why the stock is off a little bit, but once that is done he thinks you are going to see analysts’ coverage and a lot more eyeballs on the stock.

Acquired a royalty on a restaurant chain out West. The current free cash flow yield is about 8%, and they will start paying a dividend soon. They are planning on acquiring as many royalties as they can and fund a dividend with that. CEO is very smart and was involved in a lot of the restaurant royalties 10-15 years ago, so he knows the business. Likes the cash flow and the yield, and it should hold up well. They have been (unable?) to finance which is why the stock is off a little bit, but once that is done he thinks you are going to see analysts’ coverage and a lot more eyeballs on the stock.