RE:Top Pick on Market Call Today :>) Altagas (ALA TSX)
Altagas is one of our largest positions and has performed extremely well until recently when a messy quarter sent the shares down another 10 per cent from already depressed levels. The underappreciated part of the company is the distribution utilities, which have above-average growth ahead due to accelerated capital investment in its WGL utility following years of underinvestment prior to and during the regulatory delay from the merger. The LPG export business was the reason for the dislocation in third-quarter, however, this appears to be a one-off and the fundamentals for that business remain incredibly strong. Bottom line this is a combination of better-than-average midstream and utility growth with a multiple that trades below average for the midstream companies with little credit for the 60 per cent+ utility weighting. (Utilities trade at significantly higher multiples than midstream companies). Five to six per cent dividend growth for the foreseeable future and a 4.5 per cent current dividend yield.