RE:RE:RE:Russterrusster wrote:
Not really Malx, If infltaion keeps chipping away at your shares and lemons double in price your profits go down. Soon price or cost of lemonade will go up or quality will go down which in turn will affect you customers/shareholders and profit and share price.
Russter, respectfully, none of these businesses are a perfect hedge against inflation.
If you are looking for earnings growth during periods of above-average inflation, the first place I look is oil & gas. Your picks there would vary depending on one's risk tolerance. I know income seekers who prefer safety often build positions in quality pipeline businesses. The other obvious choice is gold/silver/etc but I'm not personally a fan of the heavy yellow stuff unless it's uranium.
While you may not agree that Gamehost could prosper through a period of rising inflation, I tend to think that some of its customers would see their household earnings climbing if they are employed by Alberta businesses that have direct or indirect exposure to oil & gas.
Would be helpful if we had a breakdown of patrons by demographic but I suspect that those still working would see wage increases while those who are retired would suffer from reduced purchasing power.
If we were to own entertainment assets during large uptick in inflation, Gamehost would be better positioned to navigate the cycle because of its quality venues all located in Alberta.
An exercise I often suggest to others when they are frustrated with some their portfolio holdings is to ask themselves what their portfolio would look like if they held only cash today and no stocks. In other words, rebuild your portfolio from a cash position as you best see fit. It allows them to decide which stocks they prefer to retain and which ones they may purge. It is not uncommon for us to reduce our risk appetite after experiencing a traumatic economic event. Your concerns with GH may simply stem from reduced risk tolerance. Nothing wrong with that. Just better to admit it today than fight it waiting for the next boom. I'm sure we've all whispered the oilman's prayer at some point the past 20 months. I know I did.
Gamehost is not an inflation hedge but it does stand to outperform peers during periods of higher commodity prices. This company is a high-yield vehicle that spins off its surplus earnings to shareholders when those earnings are available. Currently, there are far more effective uses of cash for the business rather than re-start its dividend during a pandemic. Would be good for you to consider the costs of closure, re-opening, employee benefits, capex, taxes, debt maintenance and ncib in total before suggesting it's time to fire up the dividend. Also consider that each share retired materially reduces carrying costs of the monthly dividend. 9% dividends from after-tax cash flow are significantly more expensive to pay in comparison to debt costs payments of before-tax prime +1% interest and principal repayments.
I tend to believe that during periods of moderate economic growth, Gamehost acts much like a utility business and we can usually rely on its dividend without losing sleep. But we are in the tail end of a global pandemic that was a once-in-fifty-year event. Surely when we consider the operating environment for this business and what its staff and venues have had to endure, a reasonable person would understand that this is the time to remain cautious, exercising some patience and understanding. You cannot force a dividend, you can assess the financial health of the company and then project what one may look like if business conditions remain stable or improve slightly.
Maybe you have a different picture of GH's financial health than I do, and that's ok too. But I don't mind waiting another 6-12 months for the dividend if that's what the BOD thinks is best. Then I'm off to Great Northern high limit room to watch Kasking raid the slots and parlay his winnings at the tables. I'd be more concerned with the "whale-risk" he presents than I would with inflation harming the yet to be announced dividend.
Would I buy Fortis shares today or would I buy Gamehost? Well, depends on my investment objectives, risk tolerance and time horizon because both of them a beautiful businesses.
Dividend might be just a few quarters away if covid cases remain subdued. Hold your horses if you are able to.