TSX:CHE.DB.E - Post by User
Comment by
Khersonon Feb 12, 2020 6:51pm
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Post# 30682577
RE:Huge opportunity here
RE:Huge opportunity here hawk35 wrote: I have made good money on CHE over the last 18 months buying and selling it. Each time I bought back in I used my profits to buy more shares.
I'm no longer trading this one because with one time bad news behind them, the stock will start to rise. The Motley article posted today touches on all the points. I'm gonna hold and perhaps add a bit more before the share price starts to rise.
1 Ridiculously Cheap High-Yield Stock Worth Watching
To find ridiculously cheap stocks, you need think outside the box. If others are ignoring a segment of the market, odds are these companies will be mispriced. Small-cap stocks in niche industries are often egregiously mispriced. Since 2017, a certain small-cap stock has shed nearly $1 billion in value, pushing its market cap down to just under $900 million. The fall has pushed its dividend up to an astounding 13%! You may be skeptical, but this company has paid the same dividend for nearly 15 years straight without ever cutting the payout. With a rock-bottom valuation and outstanding dividend, you need to give this stock a closer look.
This is niche
Chemtrade Logistics Income Fund (TSX:CHE.UN) is a niche company.
You’ve likely never heard of most of its business lines, but you can think of its as an industrial chemicals company. It manufactures a wide range of chemicals using its own production facilities, selling them to customers on long-term contracts.
What kind of chemicals you may ask? It makes stuff like sulphuric acid, carbon disulphide, ammonium sulphate, aluminum chlorohydrate, and vaccine adjuvants.
Those were a lot of fancy words, but here’s what you need to know: Chemtrade’s customers require these chemicals to stay in business, and Chemtrade is typically the lowest-cost producer, so why go anywhere else?
Industrial chemicals are all about scale. If you’re the biggest, you’re likely the cheapest. Because Chemtrade is either the largest or second-largest competitor in its core markets, it doesn’t have a problem attracting and retaining a large customer base.
It has also diversified its business across numerous geographies, materials, and end markets, reducing the impact of volatility in any one segment.
Like I said, this is a niche business, but it’s delivered fantastic returns to shareholders for nearly two decades.
The share price is still at 2001 levels, but the $0.10 per share monthly dividend hasn’t changed, resulting in long-term annual returns of more than 10%.
Now is your chance
Selling commoditized chemicals can be a messy business. As we learned before, Chemtrade has done a terrific job establishing low-cost leadership positions. That combined with diversifying its revenue sources in several ways has helped it avoid major missteps— until now. In the first quarter, the company posted a surprise loss of $29.3 million, down from a $6.9 million profit the year before. The loss stemmed from one-time items like higher litigation reserves and financing costs. Excluding these items, revenues, EBITDA, and operating cash flow were actually up.
The stock price has shed 50% of its value, but management is still confident in its long-term trajectory. On June 19, it reaffirmed its monthly dividend, representing nearly 60 quarters straight maintaining the payout. Over the last 12 months, the underlying businesses still produced roughly $63 million in free cash flow. Now trading at a $870 million market cap, that’s good for a free cash flow yield of 7.2%.
After the latest quarters roll off the books, expect the stock to re-rate quickly. In the meantime, you’ll receive an outsized 13% annual dividend.
Posted June 30th, 2019!
What a liar!
Kherson