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I'm thinking of buying ALA.UN on my line of credit (3.25%) and making the payments from the distributions of ALA.UN . I'm only thinking of $40,000 ,and its not my life savings.
The thing I like is the high div payout..
I know its not going to have the same tax breaks next year ,and there could be a rush to dump .Also interest rates may go up. Worst senario I can pay off my line of credit from other sources if I need to.. I'm new to this and just experimenting ,although $40,000 makes it kinda exciting.
Neil
 

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this is a good example of the concerns canadians have been voicing for months, here in this forum, about the future of income trust distributions.

it has been almost a year since altagas announced it would cut its distribution by 40-45%. This information is buried - one might even say it is concealed - in the 4th paragraph of a routine financial announcement dated august 5, 2009.

there is no central information clearing-house that tracks or publishes what the trusts say they are going to do about their distributions once they convert. Here in this forum we can share as best we can, but for most of canada keeping abreast of this information means every man for himself.

for my own part, although altagas has not broken any securities regulations, i am nonetheless repelled by the ethics of a publicly-traded entity that would behave as set forth above. As soon as i learned this information i dropped altagas as an investment candidate and purchased arc energy and fort chicago instead.

here are the pertinent parts of paragraph 4 from ALA.UN's august 5/09 news release:

" AltaGas expects to convert to a corporation in the second half of 2010 ... As a corporation, AltaGas’ management expects to pay a dividend between $1.10 and $1.40 per share on an annual basis ... Until its anticipated conversion, AltaGas expects to continue to pay a monthly distribution of $0.18 per trust unit. "

the 2.16 annual distribution you are counting on will soon evaporate into something as low as 1.10. Will you be alright with that.
 

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I would also caution that that LOC rate is probably variable. As rates begin to rise you will see that rate rise as well.

Also, there is a substantial amount of risk involved in borrowing to purchase a single equity. No diversification. If that company were to run into problems (say, accounting fraud--who knows?), you could be a serious negative equity position.

I'd be more comfortable with something like a dividend paying ETF like XDV or CPD (preferred share ETF). Also, dividends are taxed more favourably than Income Trust distributions.
 

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The latest quarterly report has more information regarding the re-org and it's no longer hidden. However with the slightly lower than expectations first quarter, and more info on the conversion, the price has tanked the last couple days.

Expects to pay an annual dividend of $1.32/share paid monthly.
$0.11 a month compared to its current $0.18.

Conversion should be finished July 1st pending shareholder approval.

That being said if the stock hits $16, that's an $8.25% yield after the conversion. Hopefully the OP hasn't bought in yet.. I dropped a little bit on it about a month ago, should have done more homework at the time...
 

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Humble pie, the company never hid the distribution cut at all. Back when i was a shareholder in the autumn of 09 i was on a quarterly conf call and they clearly mentioned it.

Xcaret, I am thinking of doing the exact same thing. Buy a couple of dividend payers on the LOC and let them pay the loan. If the market crashes again, we're dead anyways so the risk is worth taking with a very limited amount.
 

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$1.32 is a good div return with the div tax credit so even at 17 is over 10%. Its been trending down but don't think it will reach $16 over summer.
 

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ah, but how much growth do you foresee for altagas.

i'd rather take crescent point any day.

not same energy sub-sector, but has definite growth potential.

when i considered ala.un for a registered plan, i wound up buying arc energy because of its growth potential in the montney basin and also because it has substantial tax credits to carry forward for a year or two. Arc also has options whose sale bumps up the return to a 7 or 8 percenter.
 

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pie said:
i am nonetheless repelled by the ethics of a publicly-traded entity that would behave as set forth above.
What is so unethical about announcing an expected distribution cut, well in advance??? ... If you don’t normally read past the 3rd paragraph, then perhaps you should begin doing so ... You won’t miss crucial info that way.

there is no central information clearing-house that tracks or publishes what the trusts say they are going to do about their distributions once they convert.
IF they convert ... there is, of course, nothing compelling them to do so.
 

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hello mich

i didn't say the company "hid" the information. I said the information was buried - one might almost say it was concealed - in the 4th paragraph of a routine announcement that was then more than 8 months old. To be buried, to be concealed are passive tenses. They don't imply that the company deliberately hid anything in an active sense. At the time i posted i believed, and i still do believe, that the company was remiss to the point of negligence in not informing investors adequately of its intentions.

by comparison, there were companies that had announced their plans by august 2009. A few had even already converted to corporations. All those that i was investigating were taking great pains to make their intentions known. Some were even posting condensed information on their home pages, with links to the relevant news release or MD&A.

in the fall of 2009, the period you mention, i did not encounter one single broker who even remotely knew about the proposed altagas corporate dividend. On the contrary, all i remember are licensed brokers who were astonished when i mentioned the facts.

i didn't hear the fall 2009 teleconference to which you've kindly referred. But i would like to ask you, in which part of the teleconference was the dividend information presented. Did it appear in the first part of the conference, which is always devoted to a company's speeches, reports and announcements. If so, are you sure. Can you name the altagas official whose address or report contained this information. Or did it only emerge in the 2nd and last part of the conference, the part that takes questions from analysts; and was it only in response to a direct question from an analyst about the company's reorg and dividend intentions.

good corporate conduct is a term that can be amorphous, flou. I for one like my companies to be transparent. If there is material information that should be disseminated to shareholders, i wish to see that information clearly and fairly disclosed. No careless non-indexed one-liners in 4th paragraphs of old & obscure prior announcements.
 

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Hi HP,

I would have to agree with your explanation because i remember that it was mentioned in the last part of the conference, the Q&A.
As to who the official was, that i cant help you because i held the stock for less than a year before selling to pursue other opportunities, so never became familiar with the team.

Cheers!

Mich
 

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hello mich
<snip> I said the information was buried - one might almost say it was concealed - in the 4th paragraph of a routine announcement that was then more than 8 months old. To be buried, to be concealed are passive tenses. They don't imply that the company deliberately hid anything in an active sense. At the time i posted i believed, and i still do believe, that the company was remiss to the point of negligence in not informing investors adequately of its intentions. <snip>
I just listened to the AltaGas Q2 2009 conf call acessible from their website's Presentations page. Mention of the conversion is made @ 6:04 minutes into the call, and there is an accompanying transcript. There were no specific questions from call attendees regarding the conversion other than about the dividend payout ratio thereafter.

Still, I, too, had to search for the conversion information. Other trusts for which I've researched conversion dates have made their info much easier to locate, often as specific conversion announcements or news releases.

I agree that AltaGas could have made their conversion news more prominent. Should one read something into the fact that they didn't? And if so, what?

What do you mean by "more than 8 months old"?

I'm also curious to know more about your skepticism concerning AltaGas' growth potential.

One thing that concerns me is a consistent increase in their number of common shares outstanding and debt-equity ratio during the past 5 years.
 

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Hi HP,

I will have to agree wholeheartedly with your explanation. If i am not mistaken, the information was revealed at the end of the conference call in the Q&A. I do not remember who it was who was speaking at the time, i held ALA less than a year and did not get to know the team well.

Cheers!

Mich
 

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For consideration in a similar name, Fort Chicago has stated:

"FCE’s Board of Directors also determined the $1.00 per Unit distribution will be maintained in the form of a dividend following the conversion to a corporation (1)" - From their April 21, 2010 Toronto Investors Presentation.

"(1) Payment of distributions/dividends are subject to any unforeseen economic, operating or other circumstances"

Definitely not guaranteed, but another consideration if you are looking at ALA.UN. Current yield is about 10% - and if they can maintain it after conversion, it would be a nice payout... I believe they bumped up their forward guidance to a range of $0.95 to $1.40 DCPU.

Distributions per year since 2003 is: 2009:1.00, 2008:1.00, 2007:0.94, 2006:0.93, 2005:0.94, 2004:0.84, 2003:0.75 -- so they've been fairly steady with increases.

Disclosure: I own FCE.UN
 

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mich that is one awesome memory you've got.

but did you edit your post ?
seems to me you had posted you were buying a certain junior o & g at 3 and change, but now the reference is gone.

i won't mention junior's name since you seem to wish not to make this known, but i have to say i glanced at its website and saw enough to want to research more. High quality management. Have not gotten to the projects yet.

on altagas, i briefly checked the transcript of the august 5/09 conference call, which gender helpfully cited. CEO david cornhill did indeed announce both the 2010 conversion to a corporation and an estimated dividend ranging from 1.10 to 1.40. It was the last paragraph in his address. A news release dated the same day carried this information in the 4th paragraph. This is the news release i had mentioned above, in a march/10 post.

my point was, and remains, that the future dividend was important information for shareholders. Yet in august/09 and throughout all the months since, it was never flagged, indexed, set out in a headline that would show up on SEDAR, or even remotely given the prominence i believe it should have had.

not until april 29 2010, less than a week ago, and 9 months after the information first surfaced, do we see the looming conversion given a headline of its own in a news release.

what i found was that altagas was far more guarded than other companies. I have no idea why this would be the case. It's doubtful they would have done this deliberately. Perhaps they just don't have very good communications & IR personnel.

tojo writes about fort chicago. I have fce in my rrsp & have posted about it on cmf in the past. It's those long-term gas transmission contracts that permit them to guesstimate their future earnings and thus speak so comfortably of maintaining their high payout as a dividend. I'd like to mention, though, that when fce does convert, and assuming it will continue to pay the high dividend, i'll probably take it out of rrsp so as to benefit from the dividend tax credit.

returning to altagas, someone asks why i am skeptical about growth. Did i say skeptical ? not at all. instead i inquired what are growth prospects for altagas & said for growth i prefer crescent point. With its growth strategy, amazing dividend & healthy options, cpg remains my numero uno energy play.

looking briefly yesterday at altagas' most recent news, i believe they are working hard on new opportunities. They're as committed to turbine farms and run-of-river power generation in BC as they were last december when i first thought to buy their units but in the end chose arc energy, which at that time had significant plays in the montney basin.

one notes that only last week altagas itself announced purchase of a gas plant in the montney. Although i would still pass on altagas, in part because there are no options for it, i'm willing to allow on the positive side that its future dividend at 1.32 is on the high side of its original projection and its news is increasingly in the direction of growing the company.
 

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Hi HP,

The post about buying the junior O&G is still there. It's Emerge oil and gas at 3.51. Will be holding it for a while.

As for ALA, it was a temporary holding while i finished my DD on other companies. Don't blame the memory.

Mich
 

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So I thought I'd bring this thread back from the dead.

Facts:
- There is one dividend paymet left as a Income Trust record date of June 29th
- Will become a corporation on July 1st.
- Initial dividend payout will drop from $.18/mth to $.11/mth

If you owned this right now, what would you do? I'm debating if I should drop it right now as I would expect that the stock will drop in price since the dividend payout is going to be reduced. This I would think would also knock it off of the CDZ ETF of which it is a large part of (2nd highest at 3.61% of the ETF). The ETF alone according to my numbers holds 0.6% of the entire stock. I'm thinking that if i sell the stock and it drops, I will buy back in as it's been a pretty good dividend payer, and if I can get in at around $16 it'll be a good 8% yield if they keep up the dividend.

Thoughts?
 
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