[Berubeland]

Can someone tell me why this stock is so low? It just hit a year low again today and for the life of me I cannot figure out why.

These guys are in the business of making tons of cash. They install water heaters that probably cost them $200 then charge $20 per month for them. The labour to install probably $300. Life of a water heater is about 10 years. 8 years of pure profit

i know they just had a dividend cut but their dividend is still 14% with the cut.

There is something i am probably missing here with this picture that someone smarter can figure out.

 

[takingprofits]

Below is an excerpt from Scotia's research after the distribution cut. They have a 1 year target of $5.50

Recent Update Text as of 22SEP09.

CDPU cut reflects its current reality of increasing costs and decreasing
revenues. YOY interest costs, maintenance costs, and G&A costs have all
escalated due to unfavourable refinancing conditions earlier in the year and
increasing competition.Despite right-sized CDPU risk remains.

CWI still faces many of the same risks near term including:
(1) refinancing risk on $275M of bank and term debt maturing Jan/10,
(2) uncertainty on rules governing submetering, and
(3) higher-than-expected attrition in Q2 and Q3/09.

We remain concerned CWI’s lack of control over its waterheater rentals
operation makes it an unattractive take over candidate. We posit a buyer unable
to make the operational changes deemed necessary to extract value would be less
interested in such an asset.

 

[leslie]

Isn't the real question "Why on earth does anyone RENT a water heater?".

 

[DavidJD]

There may be benefits from a landlord's point of view, they may be considered capital costs (depreciation write offs not so quick) and I suspect the warranty may be another attraction. For a homeowner it is foolish to rent.

 

[Jon202]

For a homeowner it is foolish to rent.

I know here in Ottawa many new home buyers at stuck in a rental contract on closing.

Maybe 20 years ago when tanks couldn't last as long as they do now it made sense, and their failure was undetectable.

 

[dogcom]

Jon202 said, "Maybe 20 years ago when tanks couldn't last as long as they do now it made sense, and their failure was undetectable."

From what I understand is tanks don't last as long as they did before and are failing in many cases in 4 to 5 years as my own tank did. When I called someone to install a new water heater they told me there have been alot of problems with tanks installed in this decade.

This could also be why this water heater income fund is in trouble.

 

[brad]

Tanks themselves are kind of a silly idea anyway: if you think about it, having a water heater tank is kind of like leaving your car running 24/7 just so you can use it for 20 or 30 minutes each day. Much of the energy used to keep that water warm is wasted, although water does have thermal inertia and doesn't require a lot of energy to maintain a certain temperature once it reaches that point.

The European on-demand-style heaters are much more efficient, although far from perfect and many people have had trouble with tankless heaters.

This is straying far from the original question, but since we're talking about water heaters...

 

[DrStan]

The cost-efficiency of these tankless heaters is quite debatable. They are so expensive that their cost usually can't be recouped by energy savings alone. As a contractor mentioned to me, they're more of a luxury item for the enviro-conscious, somewhat like a Prius. The dollars and cents don't make much sense, however. Also, don't forget that in Canada, for 9 months of the year, the excess heat radiating from the water heater serves to heat the house and is not "lost". The larger the family, the more a tank makes sense since more hot water is used. Renting it is not the best option, however, which is why I bought mine from Direct Energy.

 

[Berubeland]

Tankless water heaters are expensive and mostly run on gas. The hydro ones use 60 amps set up which means that you need to run new wires etc. To convert your gas hot water tank is a snap because the gas and water you need are right there.

Also the reason why people rent hot water tanks is.... laziness. When i bought the house here it was a rental and you know what it's still a rental. I just keep telling myself I'm going to change it I start to think about actually doing it and I change my mind. What can I say.I'd feel bad if it I didn't have so much company here in lazyland. McDonalds made a fortune because people are too lazy to get out of their cars for crying out loud.

For Landlord's it great because for $20 per month they just take care of it. Just call the number on the side of the tank and they'll take care of it. Also the tenants usually pay the bill and rarely complain aout the rental charge even though it is not their responsibility to pay.