Transalta Renewables (RNW.TO)

At the present time, this has an awfully nice yield, and as well, FMV points to an increase of maybe 25%, so that the stock is not particularly expensive. It also has a nice balance sheet so the dividend is probably good and solid. Trading at about 1.5X Book so it is not horribly priced.

There was a new Buy signal on September 21. The trend line has been really good. There was a little bit of a dip last year, but it is back on trend now. Some of the indicators are a little extended, which means the stock may come back a little, or it may just pause. Expects the 1^st point of resistance will be at around $16.75.

The renewable space is starting to get a lot of attention and has recovered quite nicely. There have been some takeover plays in the space, and there are other companies up for sale. This one is kind of in the sights of Brookfield, and they don’t like paying too much for companies. There is a bit of a hurdle because of this company’s parent share ownership. This is a decent income play.

(Market Call Minute.) This has had too big of a run and has gotten a little too high

The question 6 months ago was that the dividend was pretty big, and was it going to be maintained. His response was “yes”. It ranks “okay”, being 188 out of 743 stocks. Earnings growth is expected to accelerate. Year-over-year cash flow growth has been very positive at 42%. Earnings estimates have been revised upwards by 17% in the last 90 days. They are reporting on August 5, and earnings are expected to be up. This looks like a reasonable opportunity.

(Market Call Minute.) Transalta (TA-T) has too much control over this business.

88% payout ratio so the 7% dividend is safe. They had a solid beat last quarter. The real driver is the drop downs for the parent. It gives them pretty good growth. It is now near the top of its range. He would look to sell calls here.

Renewables. It is the drop down delta. The stock is just here to pay you money. The yield has fallen to about 7% because the stock has gone up. This does not have much operating risk and there is a dividend bump planned for next year. It is a bond alternative.

This was depressed for some time. In Canada there is an appetite for renewable power, green power, and you are going to continue to see that. Prefers Northland Power (NPI-T).

This is in his Safety & Value Strategy fund. Has a free cash flow yield of 5% to enterprise value.

Receives a subsidy from TransAlta (TA-T) for some of the coal fired facilities in Alberta. If the power price is lower than a prescribed amount, then TransAlta kicks in the difference. You have to ask if TransAlta is a going concern. If there is early retirement of their coal fired facilities, it could potentially threaten their viability and their ability to make payments to this company. A good investment longer-term, but he does have concerns about the parent. There are other renewable players he prefers such as Algonquin (AQN-T).

A nice, well diversified company. As a long-term hold, he will always keep this. His company has a $13 target on it. Very well-run. Have been adding power generation globally.

Good company and in the right field and there is a lot of potential. He is a little concerned about the utility sector, because it has been overstretched. Seasonally this is not something you would typically enter into. The chart indicates that the stock has just broken above the $10.80 level, which is good. Technically you are looking at this going up to $12.20 or so. You want to get out if it drops below $10.80.

The majority of their business is hydro, wind and natural gas power generation. The big thing is the dividend co-structure they have, where they get a lot of drop downs from Transalta (TA-T). This is an avenue for them to grow. Not super expensive, especially compared to its peers. Payout ratio is below 100%, so they should be able to continue to grow assets internally. Nice dividend of almost 8%.

These are the kinds of stocks that are great in times of trouble like this, because they really have limited upside and downside. Currently looking at the long-term chart, it is at a level where the pressure is usually off of it. It is at the lower end of its trading range.