Transalta Corp (TA.TO)

It has a lot of potential and a nice dividend. There are a lot of people sitting on two sides of the fence as to where it is going to go. Long term it should do well, but there is not enough clarity right now.

He owns the preferred shares, because he feels the risk to return on a yield basis with preferreds is meaningful at 5.75%. Although common shares are a little too rich for him, he likes the 5.75% on the preferreds.

He divested it. He looks at the sustainability of the dividend and they eventually cut theirs. They are looking at decreasing carbon emissions in Alberta and this will impact TA-T with their power plants.

This has done very well since it was bought at the end of last year. A good money spinner and has a lot of potential capital increase. He can see it doing quite well.

(Market Call Minute.) It has been a Sell for a long time and he hasn’t liked it, but down here it would be a Hold.

A bit of a tough story in the near term. Balance sheet is a little bit levered up and they need to de-lever it. They spun out Transalta Renewables (RNW-T) which unlocked some value. Have a significant amount of assets that they need to drop-down into Transalta Renewables. They’ll take that cash back and de-lever the balance sheet. He thinks they are committed to maintaining an investment grade balance sheet. It is going to take some time for them to work through this cycle, so you are going to have to be patient.

Most people worry about dividends being cut but you are fine with this one. If you think Alberta power prices will go up this would be good, but be does not think so. You are fine if you are buying it for the dividend. He has no utilities and might short some soon. Hold for now until rates rise.

Has been beaten up for good reason. They have a lot of coal-fired plants in Alberta. When the price of gas is down, coal is not a great place to be. Recently bought some assets in New Zealand. Thinks the dividend is safe, but can’t see anything in capital gains. Prefers others.

Cut their dividend last year. They are trying to preserve their cash and find an area of growth through acquisitions. Power prices are quite depressed and she doesn’t see any visible signs of cash flow earnings growth going forward.

(A Top Pick Jan 3/14. Down 14.17%.) This company hasn’t really executed. He would have liked to have gotten out of this sooner. Bought a little bit more at today’s price. This has a lot of moving parts.

2030 strip bond at 6.2%? With this, you have the coupon payments and you have the bond. Transalta is BB rated and could easily get downgraded to junk in the next couple of years. A junk company could potentially default, and if they do, those interest payments disappear. He would not recommend this company.

His company has this, is a Sector Outperform with medium risk and a $14 target. The issue is that they own the Transalta renewables, and there is a little bit of unknown as to how the transition between the 2 companies, as it passed through some of the earnings. He feels good with the dividend and holds it for the yield. Would be looking to add at some point.

(A Top Pick Jan 3/14. Down 14.09%.) This one went against him quickly and he looked to exit, but kept having indications of a sort of base. Still likes it. Fundamentally it is a fantastic company.

With the current environment in Alberta, he doesn’t see any big driver to put this company forward. Their business has always been the production and sale of energy. It has been a while since they have had positive earnings. Their cash flow does cover the dividend, but overall this company has been a disappointment for a number of years. Dividend of a little over 6% is relatively safe for the time being.

He is a sector strategist. He owns it for the yield. He is kicking himself because he should have got out. It has been a chronic underperformer. He is looking to sell into strength.