Transalta Corp (TA.TO)

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.

Series D, 6.4% dividend is sent to reset in March 2016? He has veered away from this one. Still considered an investment grade credit but it is on the borderline. There are a number of issues so it is a weaker credit. Some of the assets that they have need to be refurbished.

Historically it has drifted down to these kinds of levels, and then had enormous runs as things have picked up again. There has also been some balance sheet erosion because they are paying out too much in terms of dividends. Given the yield that they have, the dividend should be cut somewhat.

8.5% dividend. He would say it represents a note of caution. Thinks they will be able to ultimately maintain their dividend but it will be close. Their old coal fired generation will be retired and they will be forced to take on new methods of generation. Would not accumulate but hold for the dividend. Watch it with a negative bias.