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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello 5i,
I have been keeping an eye on Brookfield Renewable Energy (BEP.Un) and thought it might be a good time to buy with a small drop today. You seem to like this better than, say Emera, and I was wondering whether you thought it would be worth selling Emera to buy BEP.UN? I notice that Brookfield seems to have much more growth and I imagine that is one of the big reasons you like it. It has a much higher P/E than Emera, though. I bought Emera for the stability and income. Do you think that Brookfield is as stable and secure as Emera and you would thus get the growth as a bonus?
thanks
Read Answer Asked by joseph on May 30, 2014
Q: Hi team:
I sold half of my position in CPD (i shares for preferred shares)
which I held for over a year, finally break even
I am looking for abit of income (dividends) with low risk for
capital appreciation
I already have WTE.un and Bep.un and Peyto, which one would you choose to add with the new money coming out from CPD ? thanks!
Read Answer Asked by Michael on May 26, 2014
Q: BEP.UN This is not urgent.

In your research report you mention the related party transactions as an advantage, but are they not also a risk?

Seems that there could be instances where interests between ordinary shareholders and the parent could be misaligned (buying less-than-necessary services from the parent for example - I work for a complicated multinational - this does happen). A quick Google search to try to find the ownership structure for Brookfield companies yielded this:

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/

I'm not saying the article has everything right but I'd be interested in your comments.

Basically I would never consider buying this if it wasn't for the 5i conflict free pledge because I can't figure out the structure of it all and with the related parties I wouldn't ever be sure I was getting unbiased advise. Given you're rating, however, that makes me think it might be a unique opportunity if you've done your homework... Hence I am very intrigued to know how you assess the stock in context of the bigger Brookfield picture.

As this is one of your assessed and top rated companies, hopefully you can provide a fairly thorough response as I suspect others might be interested too as an addendum to the report.

Thank you
Read Answer Asked by Andrea on March 17, 2014
Q: A recent Globe and Mail article was titled "Winning and Losing Stocks for a Low-Loonie Era". In it, one analyst named Patrick Kenney suggested that Brookfield Renewable Energy Partners is "seen as a moderate loser".

Do you agree with this assertion, and if so, should I re-think my exposure to BEP.UN? (Currently overweight in my RRSP). Thanks as always for the great service and timely advice.
Read Answer Asked by Jerry on January 27, 2014
Q: The recent question on BEP.UN caused me to check the Holy Grail of info for this stock, the Investor Relations pages of the company website, which is a far more accurate and often underutilized source than brokers or other services. Distributions, not dividends, of $.3625 US for the last 4 quarters totaled $1.45 US and with their stated goal (from the 2012 Annual Report) of 3 to 5% increase annually, it seems that the next distribution is in line for an increase (proposed record date March 31). All Brookfield companies, to my knowledge, report earnings in US $ and pay out in US $, and differences in currency translation could account for different reports in C$.

Also, as you summarized, in the "Highlights" discussion in the A.R. management states, "The primary reason for this {the reported IFRS net loss} is that we recognize a significantly higher level of depreciation for our assets than we are required to reinvest in the business as sustaining capital expenditures. As a result, we also measure our financial results based on Adjusted EBITDA, funds from operations and net asset value to provide readers with an assessment of the cash flow generated by our assets and the residual cash flow retained to fund distributions and growth initiatives."

When considering these other factors in the financial results, and that the company stated NAV per LPU of $32.35 US is far above the current market price, I understand why 5i recently added to its position in the model portfolio. If memory serves me, I believe it has traded much closer to NAV in years past, so it should be only a matter of time before patient investors are rewarded, while collecting 5.7% to wait. My question is about the discount to NAV: is 21% about normal at this time when comparing similar sized companies in its industry, such as Fortis or Emera? Thanks, J.
Read Answer Asked by Jeff on January 20, 2014
Q: Hi Peter
I know you like Brookfield Renewable Energy Partners [BEP.UN] and the 5.63% dividend is excellent, however I worry that TD Waterhouse only shows earnings of $0.24 per share [with a P/E ratio of 117.3], and the dividend is $1.58.

To add to the confusion Stockhouse show earnings of $0.24, P/E of 46.6 and dividend of $1.516. The data from Morningstar are even more confusing and contradictory.

I know you like to look at the free cash flow, as you wrote to Claude on Dec 13th, which is huge, but I really don't understand how this works. You said "various non-cash accounting charges" need to be taken into account but if the money is spent it isn't there to pay dividends. So what is a "non-cash" charge? Sounds like a shell game or cheque kiting to me!

If all the cash flow covers expenses and capital investment how can there be enough left over to cover the dividend? Surely NET earnings must exceed the dividend if it is to continue on a sustainable basis without the company having to borrow money to pay it.
Thankyou..... Paul
Read Answer Asked by Paul on January 19, 2014
Q: My question is about bep.un. Another member has also asked you a question about it today.

The National Bank Market Q internet site indicates also weak earning P/E of 244 and 669 for the Dividend/Earning ratio.

BRF preferred shares are getting hammered. The BRF/PF offered April 24,2013 are now yieldind 6.68% and their earning coverage ratio is only 0.7 time.

Same situation for BAM/PN and BAM/PM while those of Brookfield Office such as BPO/PH have remained relatively stable during the same time period.

Would it be safe to buy the BRF and BAM preferred shares for their high yield?

Regards
Read Answer Asked by Claude on December 13, 2013
Q: Good morning.

I own shares in Brookfield Asset Management (rated Pdf2 low) and Brookfield Renewable Energy (rated Pdf3 high) perpetual preferred shares (BAM.PF.C & BRF.PR.F). These shares are trading at deeper discounts than other company preferred shares with the same ratings.

May I have your opinion regarding the Brookfield and the Brookfield Renewable credit ratings and can you think of any reason why the subject shares trade at a deeper discount to the others?

Many thanks in advance for your consideration and time.
Read Answer Asked by John on December 12, 2013
Q: Peter, my question is on Brookfield Renewable. As an A rated company I have bought it on and off for the last two and a half years.Not counting dividends my share average price is down 6%. Do you expect the share price to rise a lot over the next years, to rate such a high rating? I now have a considerable amount in BEP. Thanks Ken
Read Answer Asked by Ken on December 12, 2013
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