EnerCare Inc (ECI.TO)

Energy stocks in Canada have actually done quite well in the last few weeks. That is unusual because historically that is not a time for energy stocks to do very well. This one has done quite well in the last few weeks. Historically, it does quite well from January through to April each year. Still a little bit early to invest on a seasonal basis, but technically it is already into gear. It has started to outperform and is in an upward trend. Wait until the stock comes under a bit of pressure, has a little bit of weakness coming in around the middle of January, and that would be the ultimate time to enter it for seasonal trade.

A nice little name and he models really nice compound annual growth rate EPS over the next couple of years. Attrition rates have been improving. Has a 5.6% dividend yield, supported by 64% low payout ratio. The only thing he doesn’t like is that it is really not undervalued right now. Trading at around 8.8X 2015 estimated earnings, versus the five-year average of around 7.5. Try to buy this at a lower level.

One of those companies that fall off the radar for a lot of Canadian investors. They sell, own, and rent water heaters to residents in Ontario. The cash flow growth profile during the next couple of years looks very good, especially if they tried to diversify their business and get a little bit more rental. They have a stranglehold on the sub-metering business in Ontario. You can really look for a solid dividend growth during the next few years. Dividend yield of 5.45%.

A really boring business. Water heaters, water furnaces, rentals with almost a door-to-door sales style of business. This generates a lot of free cash flow. What is really interesting is their meter system. They go to large apartment blocks and install meter systems, and get a meter feed for every person on a monthly basis. That has a lot of torque to the upside. This is a new part of their business and you should see this coming in over the next 4-6 quarters. He likes the stock here. He doesn’t own it, but does own their debt. Dividend yield of 5.5%.

He sold because you can only own so many stocks and it fell out of his model. They are doing a lot of good things. 20% of their business is in the billing stage and the cash will hit their bottom line. Great dividend. However, it is close to 40 times price to earnings so it is quite sensitive to bad news. He thinks they will not raise dividends as much in the future.

For the 1^st time since 2008, their water heater net sales are greater than their attrition. New legislation in April put a lot of curbs on door-to-door sales, and this is benefiting them. July is normally the peak season for door-to-door sales, so this bodes very well for them for the 2^nd half of this year. In the sub-metering business in the last quarter, they had positive cash flow and positive EBITDA for the 1^st time, and the street hasn’t given them any credit. Dividend yield of about 6%. Very undervalued and should trade at a premium in the utility sector instead of a discount. He really likes the name.

He doesn’t necessarily think there is any downside to the company; he just doesn’t know what the catalyst is to push the stock higher. Their underlying business is retail door-to-door water heaters along with some other areas of business. There is not enough growth for him at the current time. Dividend yield of 6%.

Continues to like this. You’re getting a very attractive dividend yield at a reasonable valuation. For the next couple of quarters, the stock is going to remain relatively range bound between $13 and $14, as they integrate a large acquisition that they made last year. In the interim you are getting paid to wait. Starting at the beginning of next year you are going to see dividend growth and cash flow growth materialize. Their acquisition of the water heater business is going to unlock some synergies as time goes on. If it got down to $13, he would add to it.

(A Top Pick April 16/15. Down 3.28%.) Announced they were going to focus more on the acquisition side of things, which means spending lots of cash and levering up the balance sheet. They are also going through a rebranding exercise. In the long term, that is a positive, but in the short to medium term that is going to be lots of the dollars spent, and he is looking for stocks that are going to be able to raise or grow their dividend. Sold his holdings.

(A Top Pick July 28/14. Up 0.90%.) Yielding about 6.4%. They are still integrating the Consumer Home Services acquisition. This is adding to revenues and giving them a steadier fee income. The smart meter business continues to grow. A nice yield play to hold on to.

Had it as a pairs trade with Just Energy. They really like Enercare and thinks it is a great investment. Nice yield which is sustainable. It has a growth profile. Great position, core holding for him. 6.2 dividend yield.

The recent pullback is a great buying opportunity. Good management. Did a large acquisition recently and are going to benefit from the synergies of that. You should also see growth in the underlying business as attrition windows down. Dividend yield of 6.25%.

It is a great company. He thinks it could go to $16.50 or so. He could see someone buying it for the dividend.

(A Top Pick April 16/15. Down 4.48%.) He is still buying this. The story hasn’t changed. They are about a 3^rd in the billing space and two thirds in the home services. Great yield of 5.85%.

A very safe name. An ideal name for retail investors. Has a 5.5% sustainable dividend yield. About a 60% payout ratio, and using maintenance CapX, it drops down to about 48%. Trading at about 8.5X EV to EBITDA, while other utility names trade at about 11 times. They have a growth profile that utilities don’t have, through the sub-metering business.