The elelephant in the room and the fool in the basement. The elephant in the room which, to my mind, everyone seems to ignore is the $2.5 billion of $31 subscription receipts/shares which ALA placed early in 2018 to pay for the WG acquisition. The purchasers of those receipts did so largely on the assumption that their investment would be sufficient to fund the acquisition and that the current dividend would be maintained.
This objective was expressed in ALA end 2017 Annual Information Sheet.
ALTAGAS’ VISION AND OBJECTIVE
The Corporation also focuses on expanding its business through acquisitions and organic growth to further support dividend and capital growth.
DEVELOPMENTS RELATING TO THE PENDING WGL ACQUISITION
AltaGas plans to fund the WGL Acquisition with the proceeds from its aggregate $2.6 billion bought deal and private placement of subscription receipts, which closed in the first quarter of 2017......
Additional financing steps could include offerings of senior debt, hybrid securities, and equity-linked securities (including preferred shares), subject to prevailing market conditions.
If ALA were to drop the dividend by 50% some one year later, then for sure some of the investors in those subscription receipts will start feeling a bit litigious - and who can blame them.
If there is a funding gap, ALA has other ways to bridge it. It will take at least a year for all the one off costs to be washed out and all synergies of the combination to kick in. I doubt if the situation is so grave that ALA would risk its reputation or a court action by making such a radical change as slashing the dividend. They have too many other options to fill a one to two year gap- thats probably all that is required. Long term the dividend by most all accounts looks safe and well covered.
Truth be told ALA themselves are still probably trying to get a handle on the combined numbers and one is going to have to patient. In the meantime one should ignore that recent bit of rubbish on Motley Fool. The author seems to totally ignore (perhaps deliberately) the effect of the combined FFO on an annualized basis - that said if, as I suspect, the piece was written in his mothers basement, I doubt very much if he would have access to the numbers.