Transalta Renewables (RNW.TO)

This has been a beneficiary of the parent Transalta (TA-T) pushing assets down, so they have a built-in growth model. TransAlta probably needs to push more assets into this. Valuation and price momentum are okay, kind of the middle of the pack, but you wouldn’t expect super cheap valuation for a utility. Quite stable and low volatility. Relatively safe and pays a good yield.

8.7% yield. An above average yield signals caution. They are paying out more than their earnings, but it is 60% of trailing cash flow, the difference being depreciation. PE is 15 times so it looks like the dividend is reasonably secure.

The parent company Transalta (TA-T) keeps pushing their stuff down, and doesn’t want to see them get into any trouble. Owns wind farms and some Hydro operations. Payout is high at 90%, but he is not concerned about the dividend. Dividend yield of 8.64%.

Growth play for 1-2 years? This is probably the more growthier aspect in the whole power/infrastructure space. If you want to start building a position, you are looking at 1-2 years down the road as they build out their assets.

Doesn’t follow this intimately. 8% dividend yield, which is well above normal. On a trailing cash flow basis, it is a 60% payout and it looks like the dividend is sustainable. Has a 15.5% PE and a PE to growth of roughly 1X. Looking into 2016, the best guess by analysts is 9% earnings growth against a 14% PE, and looks relatively expensive. ROE is roughly 7%.

Really likes this company. Did a really good job in diversifying Transalta’s (TA-T) renewable assets out of the coal plant. His company has this as a sector outperform with a $15 target. He is comfortable with the yield.

A good company. On paper this should be one of the very interesting infrastructure investments in Canada, but the payments come through Transalta (TA-T) and the ownership is a little bit muddy. Because it is not a direct line of sight, and until he can define that, he is not going to own it. (See Top Picks.)

Spun out from TA-T with more coal. With changes happening, it is good for renewable. Wind power can be intermittent. Almost 13% dividend, but some speculation that the might have to cut it because of new carbon taxes.

The parent, Transalta (TA-T) is involved with coal generated electricity. You have a new NDP government in Alberta which is much more concerned about the environment. Coal plants are notoriously bad actors as far as the environment is concerned. It was not one of his favourite names and he sold the little he had. They have rolled down the renewables part, which is mostly wind farms, etc to this company. You could probably find other areas if you wanted to search around, that didn’t have the connection with Transalta which is a negative.

This has been a core of his energy infrastructure plays. Has really good cash flow, and his company has a $15 target on it. Sold his holdings in July, but is waiting to get back in again.

The value of all yield companies have compressed. This is a good name. They have growth ahead. The price assumes no growth from here. 60% payout ratio. You can quietly buy this.

The parent spun this out trying to get value. There is value on the renewable side, but the parent is still struggling because of power costs in Alberta. The “renewable” side is still a bit niche for him. It’s not something he is really interested in.

Just had a drop-down of gas fired assets in Australia from their parent. This helps them grow. He models 11% free cash flow growth over the next couple of years. The combination of stable contracts and the recently announced drop-down is positive. 6% dividend and a 60% payout ratio. He thinks they can grow their dividend at about 7% annually. Has a $15 target on this.

A much more high-quality business than Transalta (TA-T). Has fully contracted assets. A very yield oriented asset and with the constructed cash flow stream, that makes the dividend very stable. If you want a very stable, income oriented investment, this would be the better of the 2.

Utilities? The problem with utilities right now is the uncertainty of interest rates. Likes this one as it has a really good yield. Also, looking at AltaGas (ALA-T) where the yield is much higher. Has been shying away from Transalta (TA-T) because the bulk of the power generation is coming from coal.