In Q1 2016, comparable cash available for distribution (CAFD) per share increased to $0.37 from $0.28 in 2015, an increase of 32.14%. Dividends paid per common share increased from $0.19 to $0.22, a 15.79% increase. Given that $0.22 was paid out in dividends from their comparable cash available for distribution of $0.37, the payout ratio for RNW.TO in Q1 2016 was 59%. RNW.TO has a target payout ratio of between 80% and 85%, so there is a ton of room for future dividend growth.
Not to mention, TransAlta Renewables Inc. is significantly diversified in both geography and fuel type. The majority of their cash flows, however, come from Eastern Canada Wind and Western Australia. Wind and Gas-Fired are their primary fuel types.
Alaris Royalty Corp. (TSE:AD)
Alaris Royalty Corporation (AD.TO), self-dubbed the “Optimal Dividend Stream”, provides capital to profitable businesses in need of cash in exchange for cash distributions through preferred equity positions.
In the past 52 weeks, AD.TO shares have shed 15% of their value, but YTD AD.TO is up a fantastic 20%. This just goes to show you it really is important at what price you buy and at what price you sell. Not to mention, investors who bought AD.TO at the bottom (I was one of them), benefited from a humongous yield north of 7.00%, which has now been squeezed to a still high 5.6%.
Much like Exchange Income Corp., Alaris Royalty Corp. (TSE:AD) has a narrowly defined partnership criteria so that they make good decisions and don’t get burned; this includes:
1. The partner should have services or products that are profitable in various economic conditions
2. A track record of free cash flow
3. Low risk of declining asset base
4. A dedicated management team and low levels of debt
Alaris Royalty Corp. is dedicated to diversifying their revenue stream, and wishes to have no partner contribution more than 10% to their revenue in the off-chance that one of their partners has issues – in this case, their revenue stream would not be affected in a huge way. They currently have 16 revenue streams; out of which 3 are above 10% of revenue.
Alaris’ revenue is decently diversified, for a Canadian company; 69% of revenue is from the U.S., while 18% comes from Canada and 13% internationally.
Alaris Royalty Corp. (TSE:AD) has increased their dividend 8 consecutive times since 2010, for a total increase of 79%. While payout ratios have remained consistently high, above 80% and usually in the low 90s, AD.TO is expecting a 77% payout ratio in 2016, which would be it’s lowest ever. In addition, they sport a 14% 5 year CAGR to their dividend. Alaris is also the largest position in my stock portfolio.
Disclosure: None
