Diversified Royalty Corp T.DIV

Pricing of the shares

[JayBanks]

I see several posters discussing their hope for share appreciation and expectations of the name, as a royalty play the fair market value is very dependant on the payout yield and expectations of that. This is not really a play that you expect share appreciation on as it is pretty much a cash pass through entity. Its fairly easy to value with maths, Ill go through my base numbers below and then we can discuss expectations and adjustments. When I pull up the Average 5 Year Yeild I get: 8.7% Of the last five years, last year caused a major share drop off and influences that rate by a little over 20% (as we are about 14 months of data from the drop off), because of that we had a spike in yield for a bit. Currently the Yeild is about 8.1% on 20 cents Current calculations of value based on current dividend: .20 divided by .081 = 2.47 - obviously our current price .20 divided by .087 = 2.30 - based on historical yield average If we are looking at these numbers, I would say that according to the average 5 year data the current price is actually .17 cents over bought. Because of the pandemic spiking the yeild a bit, Ill present 2 more likely expectations for average yeild: .20 divided by .085= 2.35 .20 divided by .0825 = 2.42 Without the pandemic year I would estimate the 5 year average would be between 8.25 - 8.5%, with this estimate we are still over valued according to that data a few cents. Now theres been some expectations of a dividend raise so lets play with those numbers. If we say that the quarterly payout jumps a penny, that gives us 24 cents per year: .24 divided by .087 = 2.75 (based on past 5 average yeild) .24 divided by .085 = 2.82 .24 divided by .0825 = 2.90 .24 divided by .081 = 2.96 (based on current valuation) So what Im trying to point out is that the average price to dividend numbers say the current price is over valued and if your expecting price appreciation your kinda asking quite a bit based on the history of this name. Now there are influences that can help your case in that if we price in a dividend raise there is about .25 cents of run room. Again based on historical data) I lean more into the lower range of yeild of the 8.25% and 8.5% and I like the 8.25 more. So currently Im very pleased with the current pricing as I feel it is at a premium by a little bit, and has a path to run should a dividend increase be announced, but I would not expect a normalized $3 share price at all unless the dividend was over 24 cents yearly(tho I would enjoy it). DIV is at the higher range of yield on royalty plays but by far is not the highest as there are some in the 10-15% yeild range, but there are also lower ones in the 4-6% range... Im somewhat new investing in royalties, but I like the sector but your playing a game with yourself on expectations, you would expect a high quality name to trade at a premium based likely on historical dividend safety and growth, altho DIV has a pretty safe dividend it has a history of being a moving target and has fallen from previous highs. If it regularly grew the payout I think that there would be more investor confidance with more buyers and the yield would fall and so will that historical data. But that is currently not at all the case. If Im a holder currently (which I am) I would be very pleased with current price and have modest expectations while collecting my payouts. Unless your expecting that payout increase or have a long horizon, I would not be jumping in or accumulating more shares currently until an acquisition is announced and even then you would be trading on news not fundamentals until the payout raise becomes the news. For those that want a higher share price, your basically asking for more acquisitions with no increases to the dividend, creating more safety of your payout with a lower payout ratio, subsequently that means the entity holds more of your money without passing through. Is that really what you want? I came in a little less than a year ago at 2.15, just after the June spike, kind of a FOMO move after learning about the company, but also from running the numbers the price was still a good discount based on what I just showed, turns out I could have done much better had I been pacient and waited in the 1.70-1.90 range. My hopes since we are at a premium in my opinion is to take on some dept (which to my understanding is what is being pointed at with the last release) to acquire more assets, while keeping that payout ratio high but more safer to the 85-90% range. Im not interested in the share price appreciation as I feel it will move appropriately with the dividend, and in a perfect world, it doesnt appreciate quickly and I can pickup more shares at a discount rather than a premium. Hopefully this gives a little base to discuss rather than just throwing out hopes and dreams with wild unfounded numbers...

[JayBanks]

I'm sorry the previous post looks like a sack of sh*t I'd expect no one to take their time to read, The formatting totally disappeared on it (Thanks Stockhouse) I'm reposting here and hopefully this look more reasonable if the formatting works this time: I see several posters discussing their hope for share appreciation and expectations of the name, as a royalty play the fair market

[maypeters]

I appreciate you taking the time for such a detailed post.  The expectation of higher price (from today) is based on higher cash flow and new deals. But it does look like the market really does not care about DIV's model. I dont think this is a growth stock and neither should anyone else. It is pretty much a yielder (flow through like you said).  DIV is pretty much for those who

[pointer]

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[JayBanks]

Thank you. The interest rates are yet to be moved up and there is contention on when exactly that happens and how much, I think it will be sooner than later but also very tempered. I think it would be fine to make well priced acquisition and they pay the borrowings back quickly before adjusting the dividend to the appropriate payout ratio. Also it seems by the mood around here an acquisition

[Shirtlessnomore]

That's why I own it. I like the cash flow and share appreciation would just be a bonus. I would say tho that I'd be surprised if it stayed this low if and when we get out of this environment. Cheers!

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[Tommy123]

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[babedinkleman]

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[Shirtlessnomore]

Well DIV has indeed traded above $3. In fact around 3.40 and was actually pounded down to 1.20 so I firmly believe if we were to get this fly out of the ointment there is no reason to believe 3.40-3.80 is unrealistic considering it was rising before covid.

[Shirtlessnomore]

My apologies, I did not see the 2 posts prior to my response.

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[bodiggity]

My analysis is spot on yours.  I lowered my average cost by buying a boat load at $1.20!