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Gas, but a lot of their production is liquids rich, which somewhat insulates them from commodity price volatility. Payout ratio is 140%. With this low gas price environment, he feels they will have to ultimately cut the 9.8% dividend. He is looking for a 30%-40% cut, which could potentially pressure the stock. If you own and are long-term oriented, expects the yield to come down but if it gets down to $13 it is a buying opportunity.
You can’t really go wrong with this one. Largest one in Canada and very well diversified. Retail occupancy has held very steady in the last 5 years, close to 98%. Every time a lease is coming up for renewal, they are charging them at least 10% more. 5.1% yield. He prefers H&R (HR.UN-T) for a large cap name that is very liquid and feels the valuation is a little bit more compelling with probably more distribution growth during the next 12-18 months.
Office focused. The real story is that it trades at a discount to NAV and they will really see a benefit from the Bow in Calgary which is going from a development property to an income producing property in 2013. Valuation is compelling. Forward price from operations is about 14.
NAV is about $6.50-$6.75. Raised money and invested in single-family US homes. Passing the yield on through to investors. You are really playing an economic recovery in the US. As employment improves and housing affordability improves, house prices will go up and the company will benefit. What they are doing is interesting but at some point in time they will get crowded out. Likes the business model.
Sells grain handling equipment and bins. The real story for them as a growth engine is going to be international expansion. That will have a more meaningful impact in terms of cash flow growth and earnings growth in 2013-2014, particularly as they focus on Europe. Very attractive yield and feels dividend is safe. Payout ratio is about 65%. US growth conditions push the stock down. The only other thing that can go wrong is if they get fully taxed. Had acquired a company and are using the losses this company had as a tax shelter.
Equipment company with about 50% revenues coming from heavy trucks, 25% from industrial components and 25% from power systems. A play on economic growth in Canada. Purchased some big trucks on spec that they are planning on selling in 2013, which is a little bit concerning. Very clean balance sheet EBITDA is 0.5X. Management has publicly said that as long as the EBITDA is lower than 1.5-2, they will use debt to sustain the dividend.
Wouldn’t be one of his favourite REITs, primarily because he doesn’t think the quality of the portfolio is compelling enough to warrant buying it at $4.35. Would be more interested at $3.50-$3.75. A lot of the assets they own are in peripheral areas of Québec. Industrial/manufacturing activity has been relatively weak in Eastern Canada.
Energy infrastructure company. What has happened in Canada and the US in the last few years has been an increase in unconventional oil and gas production. All this oil and gas has to be transported to refineries which has benefited this company. They provide transportation, pipelines and fracing facilities. Pretty attractive yield but he is concerned about the commodity price exposure, which is about 20%-25% of the overall pie. (See Top Picks.)
Expects to see some pretty decent cash flow growth. This is not a REIT, it is a real estate company with a significant ownership in Morguard Real Estate Inv Trust (MRT.UN-T) in addition to several other properties. Because the dividend is not very high, they take their income and plow it back into growth. Trades at a significant discount to NAV which he sees as North of $150.
Largest trucking company in Canada. Recently completed an acquisition and will be able to improve their margins in packaging and courier. Also, has the opportunity to clean up their portfolio with some divestitures which would surface some value. Sees it $24-$25 in 12-18 months. 2.7% yield increase could definitely be a possibility in the next few quarters.
REITs. Expects the low interest-rate environment to continue throughout 2013, especially with the US policy stance on interest rates. Expects that more of the REITs will benefit from debt refinancing, which will significantly increase their cash flow next year, giving a pretty good support level. Office properties tend to be a little bit more cyclical. Thinks the industrial sector will do a lot better. The more defensive sectors would be apartments. Likes seniors housing.