Q: I have a small position in BTO and was considering adding to the position or alternatively, for some diversification, buying OR. While BTO pays a decent dividend, it doesn't seem to be gaining any traction in current markets. What is your opinion for a 2 to 3 year hold?
5i Research Answer:
BTO has been frustrating, but based on its valuation (9X earnings), dividend (5.2%), cash ($230M net), and cash flow ($780M trailing 12 months) we think it is still attractive. EPS is expected to dip a bit in 2024, so it is not a huge growth story, but its size and valuation are attractive. We are fine with it, but at the same time think diversification works, and OR has better momentum. It too is not expected to have a banner year in 2024, as costs rise. But we would still be fine owning both of these for mid-cap sector exposure.