On several recent occasions 5i has recommended BEP.UN for income investors.
Today’s report on the same company was downgraded be two letter grades.
I find this a little contradictory.
Please comment. I was thinking of topping up my current position.
We continue to like BEP.UN for income, and we feel that its assets are high-quality and the management team is strong. We downgraded by two notches to a B+ rating, which is still on the high-end of our grading system and represents a high-quality name. At its previous 'A' rating, it was only one of two (CSU being the other) at that tier, and given utility companies' high debt structures and the changing investment landscape that we are in, we did not feel it was appropriate to be one of two amongst CSU. At an A- rating, it would be in the 90th percentile of our coverage list, and due to the macro concerns being persistent and targeted towards companies like BEP.UN (high debt loads), we did not feel that this was justified at this time.
We continue to like BEP.UN, and in a better market environment it has the ability to grow and see tailwinds, but we took the opportunity to place the company within a rating that we felt is more appropriate for today's landscape.