Investment Q&A

Q: I sent this question on Friday afternoon but it seems to have been lost in the deluge.

I would like to increase my holding in the utility sector for balancing purposes. I am looking for a solid dividend and some growth to balance out the more risky areas of my portfolio. I have looked at your answers regarding ENB, TRP and IPL and can't discern which one you favour. I am thinking IPL because it is the most beaten up and offers a high dividend yield. I have learned not to just chase yield but they are an exerienced company who have just increased their dividend, cut their cap x and provided thoughtful guidance (I think). The one negative I see is that much of their volume comes from the oilsands and perhaps there is fear that this supply will decline in this low priced environment because it is expensive to produce.

With this background, are pipelines a good investment as utilities and if so, is my thesis on IPL sound? Secondly, would Telus be a better "utility" choice as some analysts/advisors do include the telcoms in this sector.

Thanks for your insight.

Paul F.

Q: I currently have a holding in LRE which has a buy-out offer of $0.52 on the table from an anonymous Chinese company. I think this is to be voted on in February. Would it pe prudent to sell now at .30 or wait for the outcome at .52. By the way, Peter's appearance on BNN Friday was the most realistic advice I have heard anywhere since this downturn. Thans, John

Q: I hold a small position in Gluskin Sheff, which is getting hammered today, down 10% after an update that noted some revenue outflows.

Is this a game-changer in terms of outlook, or simply a hiccup that warrants taking advantage of the dip?

Q: As a follow up to the question asked by Richard regarding RBC I can say that anecdotally my late father starting buying bank shares in 1982. There were a number of occasions when he was advised by others to sell and he refused every time. He bought the shares for the dividend and the view that Canadian Banks were the safest Canadian equity. My mother and my siblings are very grateful for my father's wisdom.

Q: SJ is being hit fairly hard today (5%) on above average volume. Anything to explain this or is it just a bad market and some profit taking?

thank you

Q: Supposing the BOC drops the overnight rate on Wednesday by 25 basis points. ZPR would go South. CBO and VSC go North. XBB goes North. Am I correct?

Thanks

Q: Isn't the main concern on this that although the payout is well covered right now, many of the Alberta properties are perhaps empty but rent revenue still coming in under contracts and as they expire or if perhaps these businesses go under, the coverage ratio and other financial metrics will significantly deteriorate. How big a risk would this be for them? Is it quantifiable from the numbers they release? To ascertain if a distribution cut could occur sometime in the future...

Q: At the moment, the TSX is down 1.06%, supposedly on cheaper oil fears. However, your Balanced portfolio is down almost 2.5%, despite having only one oil related stock - which is up, ironically. Why would this be the case?

Q: Hi 5I Research team, Trying to read PHM' annual report. Some question marks:
On page 6 : " Revenue for the 12 month period ended September 30, 2015 revenue totaled $71.7 million up $50.5 million from the same period in 2014. The increase in revenue for the year w as driven primarily by the acquisitions of Black Bear, Black Bear North, Black Bear NH, West Home Health, Sleep Management and Legacy Oxygen in 2015, and Care Medical in June of 2014. Combined these acquisitions generated approximately $47.2 million revenue in the year from their respective date of acquisition. In addition favorable exchange rates benefited revenue by approximately $4.1 million." : the numbers seem to indicate an organic growth negative? What am I missing?
Bad debt expense= 6 M$ (approx 8% of revenues): versus 5% of revenue the year before: can we expect this to be a recurring expense? Is this a sign of bad management or a necessary bad that comes with the business?
Impairment of goodwill and customer relationships = 10 M$ : Isn't worrying to decrease the valuation of very recent acquisitions (Legacy, West Home, 0891532BC-a related party transaction, RMG and RMC)? Does it mean they overpaid for these acquisitions, bad allocation of acquisition costs or the new management is cleaning-up the balance sheet when starting their reign?
Stock-based compensation = 9 M$: Is it a one-time expense for the work done during the last fiscal year or is it a recurring expense? Written differently: can we expect other expenses for the acquisitions made in that fiscal year or exclusively new ones for future acquisitions?
Can you explain why and to whom the options were issued over the last +2 fiscal years (nearly 47 M! > 10% of shares)? Is it a way to pay the management in place or is it to pay while making new acquisitions and keep new "acquired managers" motivated?
This company seems to have a good strategy. The current year will reveal if operations are in good hands. But, the price paid for some acquisitions, and its accounting generate question marks. Do you agree?
Thank you for your collaboration, Eric (sorry for the lenght)

Q: I noticed that BYD.UN is listed in the Financial sector. Is this correct? I would have thought this was more of an industrial or consumer sector.

Q: Because I am primarily a dividend investor , I don't really have a "sell discipline" for bluechip stocks and simply ride the ups and downs while dripping dividends. This has been painful for pipelines and REITS and banks etc, some of which are down substantially. Some would say it's wiser to sell at breakdown points such as 200 day average, or sell a portion when the stock is up 50%. I have only sold rarely for re-balancing and so have taken some lumps lately. Any words of re-assurance would be appreciated.
Thanks

Q: Hi 5i team

I'm trying to put together a excel spread sheet of my portfolio for better analysis based on the financials. What would be the best way to calculate the free cash flow? Is ROIC an important measurement of profitability or is ROA sufficient? Thank you.

Q: Hi Peter:

Do you have any good Canadian start up solar companies? I am not interested in fslr but I had to put a symbol in order to submit my question

Thanks.
Yasmin

Q: Hello Peter and 5i Team

Your opinion regarding the safety of the dividend for these two REITS please? DRG.UN seems to be holding up better than D.UN in the current sell-off. I could do with some reassurance as D.UN is relentlessly dragged down by market sentiment - is it only market sentiment or is there more to this story to be concerned with ?

Thanks

Q: current price for this preferred stock is 9.75 with 5% dividend if fund winds down; the original issue price of 10.00 per unit will be paid to the share holder. is this correct or am i missing something. i have shares in dgs.pr , ftn.pr & dfn.pr how would you rate these funds as to saftey of dividend &repayment of orginal issue price

Q: Your opinion please, many thanks.

Q: I am 68 years old, retired, and rely on dividends for income. I went 100% into cash on December 31st, thereby avoiding the 7.2% drop in the TSX over the past two weeks. Once the dust settles, I plan on re-establishing my previous positions in individual high paying, low beta, small to mid-cap Canadian dividend paying stocks, diversified across most sectors. I prefer Canada over the U.S. for the dividend tax credit, and I prefer small to mid-cap stocks for their monthly payouts. Given the current macro and micro economic conditions influencing the Markets, in your view, is this a reasonable strategy going forward? As always, thank you for your valued response!

Q: Can you please give your top names (covered by you or not) of fairly-priced companies today, that stand to benefit the most from a lower Canadian dollar? XTC comes to mind as you've mentioned them before. Presuming I needed that sector in my portfolio, would you be buying it now? I'm not one to wait for a bottom in this messy market, or freak out and "sell everything". I liked your comments on BNN yesterday. Cheers

Q: Do you think this company is getting bounced around with the market? If they can deliver on their loan book and free cash, do you see potential with this company? Is patience necessary to see upside given the market conditions, or would you sell for a loss?

Q: Headlines scream out "Sell Everything" ... but surely there needs to be someone on the other end to "Buy Everything".

I've been slowly dipping in and buying and appreciate the wisdom in your answers to all members questions.

Do you have a gut feel for how long the market sell off will continue? I like open ended questions like these to see where you go with them.

Thanks
Mike