Sirius XM Canada Holdings Inc (XSR.TO)

They still have net subscriptions. They are going into the used car market and are trying to reactivate satellite radios in those cars. They have OEM agreements with all the car manufacturers and now with the NHL for content. It trades much cheaper in Canada than in the US. It is incredibly cheap, offers lots of free cash flow and gives a good dividend yield. It is 20% undervalued.

This company may be staying in the doldrums for quite some time. Competition has heated up. They may be the only XM radio player in Canada, but thinks the competition is coming from places like Spotify and Apple music. As we get better communications systems within our cars, the need for this one is going to be diminished.

On a Price to free cash flow basis, this is very, very attractive. Has very little CapX so has a huge amount of free cash flow. Looks at this as a cable company into a car. They’ll be moving the dividend up slowly, but surely, over time. A very, very safe high yielding stock to hide in right now.

You have to look at the long term. Sirius XM is really just a content provider.

Produces significant free cash flow. Have a significant debt level as well, so you have to keep an eye on that to see that it gets paid down over time. Business is decent. They are getting lots of auto business and conversion business. A pretty captured market, and not a whole lot of competition. He wouldn’t expect huge growth out of it, but as far as their dividend goes he thinks it will be quite fine. Feels the valuation is decent enough right now. Sort of an income/slow growth type of cash flow scenario. Thinks you will be okay.

Has been a big underperformer for the last several years. Growth has been much weaker than their US counterpart. They basically piggyback content from the US Sirius. Canadian market has been slower to adopt subscribers, but a very interesting trend is that as newer vehicles get bought, satellite radio is growing rapidly. In the secondary market, even 3-5 year old cars are enabled with Sirius satellite. Dividend yield of 7.43%.

(Market Call Minute.) A very steady business with a nice little dividend. More and more vehicles are being equipped with the Sirius satellite radios, so their user base will continue to grow and they’ll get great cash flow. Dividend yield of 8%.

Had recommended this in April and still likes it. Stock has declined a lot in the last year and he started buying it in the $5.75-$6 range. There is some negative sentiment because of things like Apple (AAPL-Q) announcing streaming services. Thinks they can co-exist with streaming services, because they not only offer music but also offer sports, news, talk radio, etc. This is a company that generates a significant amount of cash flow. Have almost 2 million subscribers in Canada. Pays over a 7% dividend which is very stable.

(A Top Pick May 6/14. Down 17.14%.) Had been very disappointing. He loved the yield and everything about it. He is very familiar with Sirius in the US, which has been a pretty good success story. This wasn’t very well liked 5 or 6 years ago and then started coming back to life and looked like it was in good technical and fundamental shape. There were a lot of things with respect to tax impact and sustainability of their dividend. There is a CRA assessment against them. He got stopped out almost immediately after buying it. Their installation metrics are almost 60% in new cars, and people expect that to stay in the 70% range over the next 3 years.

Hasn`t done that well in the past. There were large sellers like the CBC and they have not sold anything yet so that is an overhang. It has a 7% dividend and decent growth. Auto sales should stick in and benefit this company. He thinks it has upside.

(A Top Pick May 5/14. Down 19.03%.) Incredibly cheap relative to its US parent which is trading at 16X EV to EBITDA. Trades at 11 times. Beat their numbers last quarter. Making really good headway in the used car market. A free cash flow entity that keeps churning out a lot of money. Earnings are all right but the biggest challenge is the royalty fee they have to pay to the music industry, which causes a heightened level of churn. They seem to have a handle on that. Poised to go back to the $6-$7 range.

He has not bought it because he worries about the disrupters in the business. Cars will be Internet connected and it may not be this technology.

Generates great free cash flow. In the US the sector is about 15-16 times cash flow. 10 times in Canada. Canada is about three years behind the US. This is a great point to get in. A safe and good time to buy it.

The only satellite radio provider in Canada now. They have a licensing deal with their US sister company to use all their content. Has come under pressure in the last year or so, but on some short-term issues. A really good subscription based business. 2.6 million subscribers in Canada. 7% of the population use it. 65% of all new cars sold in Canada have the technology preinstalled and are able to convert 1 of 3 of those people as new users. There is also the used car channelling that they can go after. Thinks it is worth upwards of $8 a share. Dividend yield of 6.84%.

(A Top Pick March 25/14. Down 19.51%.) Management has a policy of giving most of their free cash flow away in the form of dividends. CBC, which has been an owner of over 12% of the shares, just announced those shares are up for sale. Dividend yield of 7.41%.