Alaris Royalty Corp. (TSX:AD), a company that provides capital to private businesses and collects dividends from these investments (preferred shares) as well as participates in the potential profit and growth of these companies, has had a rough time.
And the stock price has behaved accordingly, falling 30% since January 2017 and trading at less than half of what it was trading at in January 2015.
Alaris looks for companies that have a good, stable track record of free cash flow, a low risk of obsolescence or declining asset base, management stability and continuity, low debt levels, and low capital-expenditure requirements. I have to say, I’m biased; I naturally have a soft spot for this company, as these are many of the things I look for when considering putting my money to work in the stock market.
Underperforming investments have been a disappointment, but all the while, despite some stressful moments, the stock has been paying investors a nice dividend, and the current dividend yield is now at record levels of 9.82%.
So, the most obvious selling point of this company as an investment is its dividend yield and the fact that the dividend has increased almost 100% since 2010.
Further to this is the fact that the shares are trading at a pretty attractive valuation at this time — at book value.
The payout ratio has been high, which has also been a worry, but with management now forecasting a payout ratio of below 90%, and with a pretty healthy balance sheet, showing a debt-to-total-capitalization ratio over 20%, things may be looking up.
Alaris is clearly a high-risk name, but for those who are prepared to take the risk, you get exposure to a portfolio of emerging companies, while collecting a very handsome dividend yield.
Trican Well Service Ltd. (TSX:TCW) is a very different company, but the stock is also trading at 52-week lows.
And this is at a time when the energy market is recovering, as demonstrated by the 25% rise in the price of oil in the last year and rising activity levels at Trican.
But despite this, the stock has fallen 30% year to date and 46% from its highs back in the fall of 2017.
Back to the opportunity.
Trican reported fourth-quarter revenue of $280 million, representing a 144% year-over-year increase, adjusted operating income of $47 million compared to $1.1 million last year, and a $107.9 million reduction in net debt to $94.1 million.
The longer oil stays in this price range, the more investors will believe that this pricing environment is sustainable, and as this happens, Trican shares will skyrocket.
