AltaGas plans to convert from an income trust to a corporation around June 2010. In doing so, the company expects to pay a dividend in the range of $1.10 to $1.40 per year. This represents a cut in the range of 35% to 50% from the current distribution of $2.16. The company wants to have the same payout ratio as industry heavyweights TransCanada and Enbridge. Going forward, the company is trying to position itself as a stock that offers both growth and income (and hopefully dividend growth).
Reasons to invest in AltaGas:
- Stable and sustainable cash flows
- Low-risk, long-life energy infrastructure assets
- Renewable power generation projects (wind and hydro)
- High dividend and potential for capital appreciation
Bottom Line: AltaGas currently yields 12% and is one the most attractively valued stocks in its sector. Assuming the worst case scenario of a 50% cut, AltaGas will be yielding north of 6% in 2010. Not bad for a company with strong growth opportunities in energy infrastructure and renewable power. AltaGas is a Buy.
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CIBC World Markets initiated coveraged of AltaGas on December 11 with a Sector Perform rating and an $18 price target.
I guess they are not as bullish on AltaGas as I am.
AltaGas and Landis Energy Corp. have entered into a support agreement under which AltaGas will make a cash offer for all of Landis' existing shares at $0.80/share. The acquisition which is valued at approximately $22 million will be funded through AltaGas’ existing credit facilities. Landis is a developer of energy infrastructure assets and owns a 50% stake in the Alton natural gas storage project located near Truro, Nova Scotia (the other partner is Fort Chicago).
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Insider Buying at AltaGas
Over the past six months officers and directors at AltaGas have spent $4.8-million accumulating trust units through either the public market or option exercises. AltaGas' dividend is expected to drop to about 6.5% once the trust converts to a corporation later this year. That level would still be well above the average yield on stocks in the TSX composite and its peers such as TransCanada, Enbridge and Fortis. At current prices, insiders see value in AltaGas
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