Veritas Target $17.25 Veritas: TransAlta (TA) - $14.77 – Sensitive Subject
Buy, Price Target: $17.25
Based on Veritas’ updated analysis of TA, it believes the sustainability of its dividend will be greatly influenced by the dividend reinvestment programs ("DRIP"). If the DRIP remains at 72%, as it was in Q2-F12, TA can lower its cash outflows by almost $200 million per year, solidifying dividend sustainability while alleviating strain on its balance sheet. In the long run, Veritas believes average Alberta power prices must be in the $55 to $60 per MWh range, and average U.S. Pacific Northwest power prices must rise towards US$40 per MWh to allow TA to comfortably maintain a $1.16 per share annual payout.