Transalta Corp (TA.TO)

Still owns a small position but evaluating this currently. Have had some issues with some of their assets. Have an older fleet of coal generated assets that are in various states of functionality. They are trying to skate through the next couple of years without having any downtime, but if there is downtime, they benefit from their power trading division. The high dividend yield is a red flag.

Stock has been terribly beaten up in the last couple of years. Chart shows a lot of congestion in the $13 range. Offers a really good risk/reward. Very high dividend payout of 139%, which is well supported by its DRIP program.

Still has not been able to get things turned around. Keep paying out too much. Book value keeps on slipping lower and he does not like to see that. Every time he looks at it he regrets recommending it to clients. Hope for the best.

He has never really liked power stocks. He would not buy it. There are better alternatives.

(Market Call Minute.) They’ve got problems there. Doesn’t like utilities.

You can own it for the dividend but he doesn’t see any growth. It’s dead money.

(Market Call Minute) Be careful in the interest rate sensitives.

They have their problems out West. Have a long standing record of maintaining their dividend. Have some reasonably old coal burning facilities in Alberta.

Trading at a bit of a discount to NAV, but there aren’t a lot of catalysts to move this forward in the next number of months or the next year. The big question, if you are holding it, is how sustainable is the dividend. She feels there is an element of risk but the company is pretty committed to maintaining it. A lot of their mishaps are behind them at this time, so it looks like earnings have probably bottomed here. They have some levers to pull to help their balance sheet.

(Has a small holding for one client.) Great yield. The problem with the company is that there is not a lot going on. They are basically spinning their wheels to keep the yield where it is. This is a story for 2017-2018 when some of their PPAs (fixed price) come off and they will be able to sell into the merchant market, hopefully at higher prices. If you are a patient investor and not looking for a lot of growth, just for current yield, this one fits the bill. 7.9% yield.

Seasonal strength for this comes from April into May. Very brief, but tends to do quite well. Gain is about 6% during that period. Right now the chart shows that it is in an uptrend with a higher low with a bit of resistance at about $14.50. He wouldn’t play this on a seasonal basis, but on a technical basis it looks fine.

How secure is the dividend? Sat down with management and he is relatively confident that they can maintain the 8.25% dividend as long as power prices in the Pacific Northwest don’t weaken from here. The outlook is for modest improvement. Cash flow will increase substantially 3-4 years from now, but you have to be patient.

(Market Call Minute) Dividend is safe. Very little growth.

Chart shows a massive bear in 2008, followed by a long corrective period through to the end of 2011, followed by a final down into this year. He sees a falling wedge during 2012-2013. These are usually bullish and usually breakout on an upside in a falling wedge. In a market like this, when you have so many stocks making new highs, if you can park some money into a laggard that is starting to turn, it is probably not a bad idea. If the volume is increasing at this time, you might have something.

Doesn’t see the growth here. Even the dividend is a little bit at risk because they are paying out close to 100% of their earnings as a dividend. Yield is probably okay for now. But he would not be putting more money into it.