Tag Archives: TSX:BPY.UN

Value Stock Rally: Bargain Dividend Stocks Still Available

It was value stocks’ time to shine. They rallied. 

They were too cheap to ignore. 

Real estate stocks with big exposure to retail properties took a big hit from COVID-19 disruptions. 

Here are two examples.

STORE Capital: Dividend Stock Yielding 5.6%

STORE Capital (NYSE:STOR) fell as much as 65% from last year’s high. Then, the dividend stock developed a base in the $16-18 range for about three months before appreciating approximately 46%.

Source: Stockcharts with author annotation

It still offers a nice yield of 5.6%. And it still trades at a discount of about 20% from its normalized valuation. However, it’s meeting short-term resistance right now at about $26. The price action in the next two weeks will tell us if it’ll break above it or not. 

The commercial real estate company has a diversified portfolio consisting of 2,552 properties across 49 states and 491 customers who operate across 113 industries.

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Trick or Treat? 3 Beaten-Down Dividend Stocks

Happy Halloween! Stocks can be beaten down by the market — sometimes it makes sense but other times it’s outright irrational! Which is a trick? Which is a treat? 

Treat: A&W yields 5.1%

As the name suggests, A&W Revenue Royalties Income Fund (TSX:AW.UN) collects royalties. Specifically, it collects 3% of sales from the 973 A&W locations across Canada. In the trailing 12 months (TTM), it had CAD$0 of capital spending. 

Yes, you read that right. A&W didn’t have to pay a cent to maintain its cash flow generation of CAD$34 million. It’s such a small company that many funds ignore A&W, which makes it all the merrier for retail investors like you and me. 

A&W is a franchise. Qualified franchisees pay a minimum of CAD$250,000-350,000 to start their restaurants using A&W’s proven business model and having its support. A&W wants its franchisees to succeed because their success goes straight to A&W’s bottom line. 

A&W’s recent weighted average interest rate was less than 3.6%, which suggests it’s a low risk investment. The company’s TTM free cash flow payout ratio was about 90%. So, income investors can trust its monthly cash distribution. 

Moreover, A&W’s recent stock price decline of almost 20% from $46 to $37 is purely multiples compression from a high valuation to a decent valuation. And I believe it’s a Halloween treat to be able to accumulate the units at the current valuation.

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