Investment Q&A

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.

Q: Hello Peter and team
I'am thinking about adding bep.un + mrg.un to my tfsa for a long time hold ,agree or disagree?

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.

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

Q: I would appreciate your opinion as to which company Baytex ( Bte ) or Brookfield (bep.un ) is safer for sustaining and growing its dividend in 2014 and for stock appreciation. Thank You Rick

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

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.

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

Q: I have a question about Brookfield Renewable Energy LP.
I have owned BEP.UN long enough to have done fairly well with it. However, Vectorvest shows BEP.UN's earnings as fairly flat and low, give it a lower safety rating, and a '0' dividend rating.
Any thoughts as to why they are bearish and you are still bullish on the firm?
Thanks

Q: I've held BEP.UN since 2009 when it was Great Lakes Power. It has been a near double since purchase at $15 and the dividends have been excellent too, but I see in your response to an earlier question that you feel it is a purchase for income only, not gains; do you not feel it has a potential to near double once again over a number of years, even, say ten years, which would still be a first class return for a, hopefully, low risk equity? Thanks, J.

Q: Can you please tell me more about BEP-UN and what your outlook is for this stock? Do you still think it deserves an A rating?

Q: Hi Peter:
I have some BRF.PR.E (Brookfield Renew). Stock down 7% from my purchase. Please let me know what hold & exit I should plan. Is it callable? When?
Thanks

Q: Thanks for all your great advice! Should I keep my BRF.PR.F - Brookfield Renewable preferred shares? They have gone down over 20% this year.
Thanks

Q: I have a question about Brookfield Renewable Energy LP
How does Brookfield consistently pay out more in dividends than EPS? Does this concern you?

Q: I'm looking for a long term investment, moderate growth (10% annually), good yield (5%ish). I notice you've increased your stakes in BEP and I wonder why you chose it over Transalta? Would either be a good choice for me?

Q: Hi Peter and 5i

BEP.UN down today on acquisition news. Doesn't look like issuing shares so is this an over reaction and improved buying opp?

Thanks, Greg

Q: Is BEP.UN-T a hold buy or sell?.Thanks for your excellent service.

Q: How sensitive is BEP.UN to rising interest rates? Can you quantify sensitivity in some way? Is it more or less sensitive than a REIT?
Thanks so much!
Tim

Q: Hi 5I
I was just reading an article regarding how Kinder Morgan may be overstating their cash flow, and hence their stock could be overvalued due to not allocating enough money to maintenance on their pipes, which got me wondering about companies like Brookfield Renewable Energy and how their costs could skyrocket from natural weather disasters.
Thanks Gord

Q: My question is on Limited Partnerships. I only one one and I am interested in taking a postilion in another. The one I own is Suburban Propane Partners LP SPH. It pays a good dividend but I am taxed a non resident 35% withholding tax on it. Does all US traded LPs charged that withholding tax on dividends for Canadian residents? I would like to take a position in BEP.UN and is wondering if there will be a withholding tax on the dividend since it is a Limited partnership? I am assuming any LPs on the TSE will not have a withholding tax for Canadians. Can you confirm or correct me?