So let's see how I do with Corus Entertainment, a Canadian company which is thinly traded on the US markets. What I find appealing here is the 10% divvy and the volatility. So if it goes sideways for awhile then you get your 10% but more than likely the fixed income crowd will be buying again soon and running the price up to new highs.
I got the ticker from another source but a quick web search produced an upbeat appraisal on Motley Fool:
Corus Entertainment
It isn’t very often that investors can buy a media company trading at approximately five times trailing free cash flow below book value. This is exactly the opportunity presenting itself in Corus Entertainment Inc. (TSX:CJR.B) shares.
The market is concerned that the company is about to lose a big chunk of value as Canadians continue to cut cable. But Corus didn’t get the memo. The company’s free cash flow actually went up last year compared with 2014. The only reason why earnings were negative is because of one-time asset write-offs.
With Shaw Communications buying Wind Mobile, it’ll likely be looking to sell some of its media assets in 2016. It’s likely that Corus will pick up many of these assets, considering the close relationship it has with Shaw. Remember, Shaw originally spun out Corus back in 2000, and the family still controls the company via multiple voting shares. Corus could easily grow earnings in 2016 on such a transaction, even if the overall advertising market is weak.
Corus pays a 10.5% dividend. Unlike just about every other double-digit yield in the market today, this one is actually sustainable. The company generated $194 million in free cash flow in its fiscal 2015, while paying out just $76 million in dividends. It can comfortably keep its streak of more than a decade of consecutive dividend increases alive.
Buy low, sell high folks.
Stop out below the recent low at $6.80. Likely to see $7.60 before moving into wave 3 of 1 up.
Wow, Corus actually just announced that it's buying the entirety of Shaw Media for C$2.65B (about $1.86B).
ReplyDeleteLooks like they will load up on debt to make this acquisition.
The shares thus pulled back into my buy zone at $7.60.
ReplyDeleteHere's the thing. PPL get affixed on a topic like "debt is bad for a stock" simply because too many companies loaded up on leverage at the wrong time and ended up risking the company survival as a result. Thus, debt is always bad. Remember, I am talking about companies here, not individuals. I think individual debt is usually/always bad because it is taken on for consumption and thus not self eliminating. But debt taken on by a company at the right time, and some of this can be luck or some of it can be a case of waiting until assets go on the market cheaply, can result in much faster profit growth than by increase in sales of existing production.
I don't know which it will be for Corus but the chart (i.e. the herd) tells me that it will soon be viewed as a good thing and shareholders rewarded. Again, below $6.80 and the herd rescinds that view.
See how it works? When it comes to trading, forget about fundamentals! Neither you nor I know what the TRUE fundamentals are. Only the chart can give useful clues into what the herd is likely to do next.