TSX:SRV.UN - Post by User
Comment by
BlueJay2020on Nov 26, 2020 6:32pm
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Post# 31986003
RE:Hypotheticals and Sizing Govt Support Programs for SIR
RE:Hypotheticals and Sizing Govt Support Programs for SIRGreat analysis. There are at three other important factors that should support SIR and also the share price. The first is the support of lenders - the light is at the end of the tunnel now, so why would they pull the plug at this point? Although the profitability of the parent co. may be dragged down for a significant period of time because of a heavier debt burden, as required, as long as they can keep operating then owners of the royalty stock will keep collecting the divi (which will eventually be reinstated if this company has any future at all).
The second factor is risk tolerance of investors and potential investors. There must have historically been a lot of retail investors, like me, who loved the yield. I had to bail out of SIR in March because my overall portfolio was taking such a beating. However, today was the first day that my overall portfolio returned to its pre-COVID levels - you can imagine I am celebrating! At the same time, I am looking to put a portion of my capital to more risky plays. So far I have nibbled at just 6000 shares average at $2.78, and already sitting on a 20% profit.
But I have quite a bit of dry powder and I think we have reached that inflection point where even $3.50 a share looks awfully good value. When the dividend is reinstated, even to half of what it was, then I think we are going to see a pop of 25-30%.
Beyond that is where the third factor comes into play, and it's a bit of an unknown quantity - that is the competitive landscape and how different it looks in 2021. Will a lot of mom and pop places be permanently shut, and the bigger chains hoover up the traffic? I think that seems likely. The offsetting factor (again hard to quantify) is any permanent shift to home delivery and what impact that will have on SIR, and whether it can successfully adapt.
When you add all that up, there is a lot to be bright about in my view. SIR is not an easy stock to trade in and out of, so some care is needed, but I expect to be doubling down over the next quarter.