Recent Purchase: Alaris Royalty (TSE: AD)

Alaris Royalty

On January 15th, I purchased 60 shares of Alaris Royalty (TSE: AD) at $22.00, with a trading cost of $6.95 for a total investment of $1, 326.95. This is the second time I purchased shares in AD, I previously bought 60 shares in November at $24.80. I’ve doubled my position in AD, and reduced my average share purchase price to $23.40 a share. My new shares of AD have increased my 12-month forward dividend income by $97.20. This puts my 12-month forward dividend income at $1,221.36… And you know what that means? The Dividend Beginner now earns an average monthly dividend income of $101.78! Finally, I’ve surpassed the average of $100 a month in dividend income. This is an incredible milestone and I am very pleased with myself. 

Company Overview

According to CIBC Investor’s Edge:

Alaris Royalty Corp. (Alaris) is a Canadian company that provides alternative financing to a range of private businesses in North America. The Company earns its revenues by providing capital to private businesses (Private Company Partner). Alaris provides long-term equity capital to companies for whom traditional private equity capital or debt is not typically available or attractive, namely, privately held companies whose owners want to retain long-term control of their businesses. The Company has around 12 Private Company Partners, such as LifeMark Health Limited Partnership, LMS Limited Partnership, End of the Roll Carpet & Vinyl, KMH Cardiology Limited Partnership, Solowave Design LP, Labstat International LP, Agility Health LLC, SCR Mining and Tunnelling L.P., Sequel Youth and Family Services LLC, S.M. Group International LP/Le Groupe S.M. International S.E.C., Kimco Holdings LLC and PF Growth Partners LLC.

Here’s some more information about all of their partners from the Alaris Royalty web site; they disclose the industry of the partner, capital invested, and the resulting distribution provided in return. 

Why I invested in Alaris Royalty

  • Alaris Royalty currently sports a dividend yield of 7.63%
  • Pays out distributions monthly (I now receive $16.20 a month)
  • Double-digit 5-year dividend growth rate of 12.72%
  • Increased dividend ten times since April 2010
  • Distributions that the corporation receives from their partners are paid in priority to other equity holders
  • They are paid distributions monthly and receive monthly cash returns rather than having to rely on an exit for returns
  • Their long-term goal is to have no single revenue stream accounting for more than 10% of their total revenue
  • Thomson Reuters predicts a 12-month mean price target of $34.50, which represents a 57.18% upside
  • Thomson Reuters predicts a 12-month low price target of $32.00, which represents a 45.79% upside
  • Thomson Reuters analysts recommendations: 1 Strong Buy, 8 Buy, 0 Hold / Reduce / Sell
  • Trailing twelve months revenue growth of 50.17%
  • 2016 forecasted revenue growth: 58.7% (9 analysts)
  • Very high profit margin of 69.18%
  • Trailing P/E of 14.8 puts the stock at a 37% discount relative to it’s 5-yr average trailing P/E of 23.5
  • Forward P/E of 13.0 puts the stock at a 38% discount relative to it’s 5-yr average forward P/E of 21.2
  • They consider themselves to provide the optimal dividend stream

8 Replies to “Recent Purchase: Alaris Royalty (TSE: AD)”

  1. Can’t say I know much about this stock but the over 100% payout ratio is a bit concerning, especially considering the high dividend growth history. But I’m sure you made the proper analysis before you pulled the buy trigger.

    1. Hey Tawcan,

      I fully understand your reservation concerning the payout ratio, I was too, but definitely looked deeper into the company and am willing to take the risk.

      Here’s why:

      1. Earlier this month they announced a new partner, Mid-Atlantic Health Care, with their distributions from MAHC their payout ratio is reduced by roughly 2% .
      2. The corporation declared that their annualized payout ratio was actually 82% on the date of their Q3 earnings release.
      3. Revenue from one of their partners, KMH, is not accounted for in these calculations as they’re going through a strategic process to figure out what they’ll be doing with them going forward.
      5. They diversify their revenue streams to reduce their reliance on any one partner, and can maintain the dividend despite issues with one company (as they are with KMH).
      6. They appear to be successful in reducing and stabilizing their payout ratios over time (from
      12 months ended Dec. 31, 2011 to now): 104%, 92%, 81%, 89%, 82%.
      7. They have been having some issues with the CRA concerning tax deductions which has been ongoing for some time now and has been eating at their cash. Once this is over they should be better placed as well.

      *I invite you to check out their investor presentation from Nov 2015:

      Thanks for stopping by,

  2. It’s all about risk and reward. I never heard of this company before and I thank you for bringing it to my attention. Seems out of my range of comfort as an investment though. I prefer the more ‘boring’ dividend payers instead. But, I guess every portfolio can add a little risk as long as it’s managed well. Impressive 5 year dividend growth rate though. Thanks for sharing.

    1. Hey DH,

      Glad to have brought this company to your attention. Yeah, every one will have a different portfolio and risk management. The dividend growth rate is great here, looking forward to the future for AD.

      Thanks for commenting,

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