Q: I own TOU and TPZ and like them both for long term holds. TOU was recently added to the 5i income portfolio. Why go with TOU as apposed to TPZ, which is more of an income structured investment. Do you feel that TOU will offer a better total long term return both with respect to their dividend and capital appreciation?
Thanks.
Thanks.
5i Research Answer:
We like both TPZ and TOU, and TOU owns roughly 28% of TPZ, and so it naturally has some exposure to TPZ.
TOU is the larger name ($17.9B market cap. vs. TPZ at $2.8B), both have strong free cash flow yields, but TOU has a slightly more attractive profit margin profile. TOU also trades at a better valuation. Overall, we would be comfortable with either name, but given TOU's natural exposure to TPZ and its larger size, we opted for TOU in the income model portfolio.