Student Transport of America Ltd. (STB.TO)

Not a fan of this. Ranks reasonably well. Has such a large P/E ratio that he has been scared off. Book Value has been written down to practically nothing. Analysts have been cutting back on their estimates too, so be careful.

He exited a while ago, concerned about it being a heavy maintenance business. They pay out a large majority of their cash. They already have a fair bit of debt.

Payout ratio crept up a little last year, but is back under control this year, somewhere in the 75%-80% area. A fairly sustainable dividend. The recent weakness gives you an opportunity. This is a non-cyclical business. Kids are going to go to school regardless of what the economy does.

It probably is a good entry. They report in US$ so a weaker CAD$ affects them. You are seeing operation improvements. The balance sheet is not bad. The payout ratio is reasonable. It is an illiquid stock. If you get it at $5, he would be comfortable with it.

3^rd largest bus transportation company in North America. The key driver for growth is fleet buses, the number of buses they are operating, which is currently 13,000. However, revenues are shrinking at about two thirds of what they used to be. The other issue is the greater CapX required. In 2014, this was $28 million, and for 2016 it will be $60 million. Historically they have paid a very, very robust dividend, currently 10.7% through serial issuance of debt and equity. Effectively you are buying a high-yield bond.

This pays a US dividend, which is gravy. The cash flow equals the dividend. The stock has come down on concerns about the renegotiation for 2016. Dividend yield of 9.5%.

A student’s school bus company. A very, very stable business. Fuel costs are a little bit of a help to them. They have long-term contracts with municipalities. Payout ratio has gone from 92% in 2014 and will be around 68% this year and probably under 50% next year. It had a couple of rough months because about 6 weeks ago a Short seller in the US started talking about a dividend cut. They have paid a dividend for 10 years without missing it once in 10 years, and he thinks it is secure.

(Market Call Minute.) Stock has been selling off and the dividend is pretty high, so you wonder if it is going to get cut at some point. He is watching this and can’t figure out why the market isn’t liking it. He would hold off until there was a little more clarity.

9.6% dividend. An old income trust. Student transportation in the US and Canada. Payout ratio is about 90% so a bit high. You have to win contracts and you have to invest in new buses.

Listed on both the TSX and NY exchanges. You want to focus on the Canadian side because if we do have a bit of a bottom on the Cdn$ you will get crushed on the currency translation. He can’t say too much positive about this stock. Has significant moving averages which are pointing lower. There are lower highs and lower lows, so it is not the ideal place to be. Yield of 8.8%.

They have to continually raise money to pay their dividend. People love the dividend and the safety. Historically their dividend is funded by acquisitions and debt. He would rather a company that continually raises its dividend from organic growth.

3^rd largest provider of student bus services in the US. They are about to pay most of their dividends in US$’s. Even though they met estimates on EBITDA, their margins were impacted which is why it got hit. A good free cash flow business with a good yield of about 7%. They benefited from low fuel costs, and there is a feeling they are going to get some contract wins coming up in the next couple of quarters. He would want to see their EBITDA and margins stabilize before he would get excited about it.

It has a significant short position. They have a higher debt level than he focuses on. They are okay on the interest coverage, but he is just not a fan. We are getting closer to the end of the school year.

Just announced they got a big contract in Colorado. Issued equity to pay down their convertible debenture, so they want to get their debt down. Stock has gone sideways, which it is supposed to do, because it is a very steady business. Valuations are not extreme. One the things that helps them is that fuel costs have dropped substantially. Yield of around 6%-7%. Looks interesting.

Recently did an equity issue. You will get a stable dividend. It is a good way to play the US recovery. A good long term growth story. They normally grow by acquisition. The dividend is sustainable. 6-7% dividend and 2-3% growth.