RE:diversified convertible debenture
smartamateur wrote: hi folks
wondering if one factor keeping people away from this stock might be related to the 57 million convertible debenture ending end of next year ? (exercise price 4.55$ i think?). The only way they can pay this is likley via a forced share conversion at 95% of price market. Which put a cap on further dividend increase i believe for a while. a complete forced redemption would add something like 20 millions shares.
To be honest, I don't think so... But is might keep some away.
I have never known about this info you provided, nor would I have cared about it before this, nor do I care about it now lol... it is interesting tho, but I dunno if it will really will keep dividends contained everything points to management having a good handle on things, with rising royalty rates, potential and I believe the debt is in good shape, I don't remember what the numbers look like cause I kinda forget about doing analysis outside of dividend based stuff on this cause I'm already in, I'll worry about debt when they make their next transaction and investigate if I'm still comfortable then.
I think most of the reason people aren't near this stock is:
A) it's difficult to find - I was running screeners looking for dividend stocks and what not for like 6 years before I found out about this one, I don't remember how I found this, might been on BNN or something else specific, but everything I was doing before should have found this and it went under my radar, so I'm sure it's off others.
B) it's a high dividend - most investors are taught high dividends = high risk, if it's over 3-4% there is something wrong with it and it's high for a reason, people that seem to invest in this have done some decent research into what this is.(I'd say really good, but I didn't know about the debs lol)
C) it's a lower market cap - because of the low cap it's difficult for many funds to jump into this because they tend to have rules to avoid smaller things for thier safety, thus it needs to be a specialized fund to jump in here so I would say it's mostly retail investors and specific professionals.
D) the dividend is lower than previously - many people have rules and won't go near things that have lowered thier payouts at some point or a certain time frame, and this lowering was recent history.
E) It doesn't yet have elevated margin capabilities - I believe it can be margined at 50% but it doesn't apply for 70% until it passes $5/share unless you have a very specialized account. This likely doesn't have a major amount of people sitting on the sidelines, but there are likely a few that like using margin that pick other options they can take advantage of especially in this low rate environment.
F) this is pretty much all customer services - many people don't really like investing in this area especially since none have a competitive advantage or are staples, really only Mr. Lube is close to a major need but really there is lots of competition in all sectors we own buisness in (that said our royalties are some of the best/well known in thier classes)
There are several factors that can push away interested parties... and to be honest if the Debs are converted as you say, it might actually help my point on 'Market Cap'.
I personally enjoy finding and trying out these small things that pay well, I have a few of them and several more on my watch list.