Altagas Ltd (ALA.TO)

They did some major missteps in the last year and a half. They were already facing some hurtles. The acquisition has still not closed, being held up by regulatory approvals. Buy the sub-receipts at a discount and then if the deal does not work you get the higher face value back. Also the acquisition is not as interesting as it was when it was initiated because of changes in US tax rules. We will know more over the next month or two. They are the .R version of the security.

All these energy infrastructures have come down. Distribution is high and probably sustainable. He likes what he sees here but not one that he actively covers.

It does not have much earnings support. However the price of oil is oozing slowly higher. He hopes soon it will 'energize' the oil patch. The problem is that they are paying out more than they are making. Unless there is a big recovery in earnings, they are going to have to cut their dividend fairly soon. They do not have a powerful balance sheet.

The whole sector has pulled back and ALA is interest rate-sensitive, too. The big WGL acquisition in the U.S. will remain an overhang until later this year when/if approval is granted. Prefers Pembina and Enbridge.

He loved how the company has done the transformational acquisition. They have taken on a lot of debt, but in a low interest rate environment. He did sell out thinking there was a 20% risk of real inflation and the company may not be able to sell assets to pay for the acquisition.

They are in the process of acquiring WGL Holdings in the US and believes the final regulatory approval from Maryland should eventually come. It appears they are in the penalty box until they successfully digest this sizable acquisition. He does not particularly like this name.

Be cautious and don't shop for dividend stocks in general. Play defence with names like this. Can't speak to ALA's dividend which is above 9%. Generally speaking, take profits and rotate into other sectors and be conservative. With ALA, wait and see. They are broadly based in Alberta, so be even more cautious.

Owns the receipts. Management blew it. If they sell their crown jewel to finance this deal, then the stock will get chopped. If they walk away, the stock will rise a little to the $31 receipt level, perfect for him. Three years ago they bought Californian assets and recently couldn't sell them. Managament has disappointed, and destroyed value. He hopes activist investors or regulators get involved to break the deal, so ALA can get out.

High yield that is sustainable. Some non-core assets they are looking at to sell to reduce the leverage. Dividend is sustainable.

if you buy for the yield, then you won't get much else. If the yield doesn't rise, then inflation will grind away at it. Who knows when the WGL deal in the U.S. gets done, if it does? Doesn't see stock price appreciation. No downside protection here either. So, he'd rather buy its bonds.

Problem is their acquisitions: major U.S. one with a lot of debt. The pending deal with WGL Holdings is weighing on the stock. Not worried about the high dividend above 9%.

Your first reaction with seeing the 9% yield is that it's in trouble. ALA is awaiting US approval of the
WGL utility deal, carries a high debt and was unable to sell a holding recently. But he believes the deal
with go through and ALA will sell off assets to reduce their debt. This is an opportunity.

They own this already and are a little concerned of the recent break down below $26. He believes the dividend is safe. It may take a year for it to find its legs. He sees $32 as an upward target. They just raised the dividend. Yield 9.1%. (Analysts’ price target is $28.82 )

He continues to feel good about the long term prospects. Last week they said they had a process to sell some assets. Management are confident on the acquisition.

The stock came off because they are making an acquisition and to fund this they need to sell some assets. It created uncertainty how this would be accomplished. Dividend yield of 9% is on the high side. Seems to be sustainable but typically when dividends go over 7% creates uncertainty. (Analysts’ price target is $29)