This third installment of the series provides an update to the Canadian corporations and trusts which were detailed as part of the “Navigating the Wild, Wonderful World of Canadian Corporations” series. It will be my commitment to update all Canadian corporations and trusts on the FPI Rated CanCorps spreadsheet with new information and rating upgrades on a quarterly basis.
Regarding Ratings on the FPI Rated CanCorps Master List…
For review, the original article described Canadian investments, and compiled a spreadsheet with a rating system to help us navigate this wild, wonderful world of CanCorps. The rating system is summarized below:
Highest Rating - 1
Positive dividend growth for past five years
Price point recovered from both Halloween Massacre and financial crisis
Positive profit margin
High Rating - 2
Positive growth or stable dividend for past five years
May have been launched after Halloween Massacre or financial crisis
Price point recovered from financial crisis
Positive profit margin
Good basic fundamentals
Medium Rating - 3
Dividend is currently stable; may have a reduction in past
Dividend restored to pre-Halloween Massacre level
Price point recovered from financial crisis
May have one or more problems with fundamentals
Medium Low Rating - 4
Recently reduced dividend
Price point not recovered from either financial crisis or Massacre
May have negative profit margin
Low Rating - 5
Consistently reduced or eliminated dividend
Sinking share price
Recent bad news
Some of you had questions about the rating system. Most agreed and appreciated the ratings, but some wondered if I was dismissing some companies with a “2” rating or below. Answer? No way!
For clarification, let me state that I view the top three ratings all as solid investments. When dealing with high yield, a stable (as opposed to growing) payout is acceptable. Companies with a “3” rating have stable (though not necessarily growing) payouts. Therefore, the rating system reflects:
Ratings 1 - 3: “Investment Grade”
Rating 4: Invest with Caution
Rating 5: Avoid
On with the Updates…
If there is a bright lining to the dark cloud of a lousy trading week, it would be the creation of more opportune distribution yields. There were almost a half-dozen CanCorps that did not make the 5% minimum yield back in July that have now been inducted to the FPI Rated CanCorp club, with one of them making an FPI rating of “1”.
I also wanted to take a stronger look at distribution history, especially in terms of how CanCorps handled transitions to corporations in 2011. As such, I was a bit tougher on those CanCorps who reduced their distributions for 2011; most of these received a downgrade. A few CanCorps improved upon further research; three received an upgrade in rating.
Any major updates and changes are highlighted in yellow. All metrics were updated. You will note the spreadsheet was overhauled to include all Toronto Stock Exchange symbols that correspond to the original pink sheets listing, and now includes payout ratios.
As usual, please feel free to provide your feedback on what information and issues should be included for the 4Q 2011 update.
Ashton Hill VIP Income Fund (OTC:BVPIF) (VIP.UN) – Formerly Brompton VIP Fund. Mutual fund which invests in income-producing securities. Because the price share is significantly depreciated and distributions were reduced in 2008/2009, (OTC:BVPIF) is started at a “4” rating.
Valener, Inc. (VNRCF.PK) (VNR.TO) – Natural gas utility with a 29% ownership in Gaz Metro; involved in natural gas distribution, transportation and storage. Stable utility, yet decreased distribution for 2011, so started at a “3” rating.
Algonquin Power & Utilities Corporation (OTCQB:AQUNF) (AQN.TO) – Made spreadsheet due to recent high yield. Owns direct interest or equity in thermal power generating facilities and regulated utilities. Significantly reduced distribution in 2009, but has since maintained a stable distribution, with two distribution increases in 2011. Although it currently has a positive growth trajectory, because the distribution is not restored to pre-Massacre levels, and because of current negative 5-year dividend history, the issue is started at a “4” rating.
Arc Resources, Ltd. (OTCPK:AETUF) (ARX.TO) – Made spreadsheet due to recent high yield and is a conventional oil and gas trust. Distributions were reduced in 2099, but since have remained stable at .10 per share. Because share price and distribution has not recovered from pre-Massacre levels, the issue is started at a “4” rating.
Baytex Energy Corporation – (BTE) (BTE.TO) – Made spreadsheet due to recent high yield and is one of the more well-known Canadian corporations trading on the U.S. exchanges. Although share price has appreciates nicely from pre-Massacre levels, the distribution has not, so BTE is started at a “3” rating.
Vermilion Energy, Inc. – (VEMTF.PK) (VET.TO) – Made spreadsheet due to recent high yield. Another well-known Canadian corporation. Vermilion rode out the Halloween Massacre without a dividend decrease, and share price has appreciated significantly. Management also has a strong management commitment to maintaining distribution. Vermilion is started at a “1” rating.
Cineplex, Inc. – (GM:CPXGF) (CXG.TO) – Made spreadsheet due to recent 5% yield. Operator of movie theatres. Cineplex squeaked through the Halloween Massacre with only a temporary and ever-so-slight shave off of dividend, which was quickly restored to pre-Massacre levels in 2009. If not for the “shave” this would be a “1” rating; but with the shave it is started at a “2” rating.
A&W Revenue Royalties Trust (OTC:AWRRF) (AW-UN.TO) – Increased distributions for 2011, exceeding pre-Massacre levels, and bettered profit margin in 3Q by 50% (although still negative) and is upgraded to a “2” rating.
Pengrowth Energy Growth (PGH) (PGH.TO) – upgraded to a “4” rating upon further review.
Temple Real Estate Investment Trust (OTC:TRLSF) (TR-UN.V) – upgraded to a “4” rating upon further review and with improving fundamentals.
Le Chateau, Inc. (GM:LCUAF) (CTU.A-TO) – reduced distribution for 2Q from .19 to .18. and is downgraded to a “4” rating
VicWest, Inc. (GM:VICUF) (VIC.TO) – reduced, not increased, distribution for 2011; from a $1.56 yearly distribution in 2010 to $27 cents paid quarterly in 2011, which is $1.08 yearly. VicWest is downgraded to a “4” rating.
Rogers Sugar, Inc. (GM:RSGUF) (RSI.TO) – reduced distribution for 2011 from .45 per annum to .34 per annum and is downgraded to a “4” rating.
Crescent Point Energy Corporation (OTCPK:CSCTF) (CPG.T) – downgraded to “3” stable rating, with concerns about payout.
Calloway Real Estate Investment Trust (OTC:CWYUF) (CWT-UN.TO) – further drilling into distribution history shows temporarily reduced dividend in 2007; downgraded to “3” stable rating.
Innergex Renewable Energy (GM:INGXF) (INE-R.TO) – downgraded to “3” stable rating, with concerns about payout.
General Donlee Canada, Inc. (OTC:GDIMF) (GDI.TO) – reduced distributions twice in 2011 and is downgraded to a “4” rating.
Parkland Fuel Corporation (OTCPK:PKIUF) (PKI.TO) – reduced distributions for 2011 from .105 monthly to .085 monthly and is downgraded to a “4” rating.
Liquor Stores NA, Ltd. (GM:LQSIF) (LIQ.TO) – reduced distributions for 2011 from .135 monthly to .09 monthly and is downgraded to a “4” rating.
Bell Aliant, Inc. (GM:BLIAF) (BA.TO) – reduced distributions for 2011 from .2417 paid on a monthly basis (.7251) to .48 per quarter and is downgraded to a “4” rating.
Westshore Terminals Investment Corporation (WTSHF.PK) (WTE-UN.TO) – reduced their variable dividend (between .41 and .48 in 2010) down to .28 and .25 for the first two quarters of 2011 and is downgraded to a “4” rating.
Sentry Select Primary Metals Corporation (GM:SPMLF) (SGT.UN) – raised distribution in September from .085 to .09.
Davis + Henderson Corporation (GM:DHIFF) (DH.TO) – raised distribution in August from .30 to .31.
Enbridge Inc. Fund Holdings (GM:EBGUF) (ENF.TO) – paid monthly distributions in 2010; revised to quarterly in 2011; in July announced return to monthy dividends; same payout.
Student Transportation, Inc. (STB) (STB.TO) – Effective September 6, 2011, Student Transportation now trades on NASDAQ and the pink sheets symbol (STUXF) no longer applies. The trading symbol in the U.S. for this issue is now STB.
Wajax Corporation (GM:WJXFF) (WJX.TO) – raised distributions twice in 2011; maintains “3” rating because distribution not back to pre-Massacre level.
Zargon Oil and Gas, Ltd. (OTCPK:ZARFF) (ZAR.TO) – although fundamentals have deteriorated, this entity received three analyst upgrades in September 2011.