Unit price: $20.08. Book value per share: $13.18. Market cap: $1500 million (medium). Distribution: $0.11 per month or $1.32 per year. This was reduced 40% in July from $0.18 per month. Yield: 6.5%. P/E: 11.5x. Debt to equity ration: 0.58. Converted from an income trust to a corporation on July 7, 2010.
AltaGas’ strategy is to focus on low-risk, high-quality assets that create, move and hold energy. We are finding those assets in new and exciting places, and managing them to provide consistent, long-term growth with an eye to the future. Our best days are ahead of us as we successfully deliver the energy society needs in a sustainable way.
This was an income trust that just converted to a corporation. If you recall that companies had seen their valuation jump when they converted to a trust, you may be surprised to learn that this trust has seen an increased valuation as they converted back to corporations. It previously yielded over 10%, taxable, and now yields a still respectable 6.5%. The yield is dividend income, which is only about 1/2 taxable when held in a non-registered investment account. The after-tax yield is still reduced by about 1.2%, which should give the corporation more flexibility to reinvest in their own projects or in purchasing other companies.
Liquidity is reasonable, making it fairly easy to trade. The yield is adequate, and should be sustainable, given that it was adjusted earlier this month. There is very little uncertainty stemming from the corporate structure or taxation. The low P/E implies some room for capital gains in future.
Profitability relies on natural gas, with hydro a plan that’s still years down the road. Being in the energy sector, it is subject to increased volatility. It may also be subject to regulatory changes.
I have trouble getting excited about this. Then again, boring isn’t a bad thing in investing. It will probably be dependable and sustainable, although it may be subject to surprises from regulators or the energy market. It was priced around $20 in 2004 and is back at $20 in 2010, after rising to $30 and falling to $13. If it forms part of an income portfolio, I would be comfortable with it, although unwilling to give it a large weighting.