Diversified Royalty Corp T.DIV

Been watching this one

[hawk35]

Been watching for a while but still have not taken a position.  My concern is the exposure to Mr. Lube. 
Lube represents almost 45% of revenues and this quarter they added more locations.  Normally that is a good thing but it exposes them to many risks. 

The transition to EV's is happening faster than most expected.  Most auto manufacturers in Ontario are retooling their plants for EV and the effect on Mr. Lube is unknown.  Same retooling is going on in the US.  Even a 10% negative impact on Mr. Lube business would put pressure on the dividend. 

The market would be a lot more comfortable with DIV if they could add additional partners.  Air Miles is likely seeing an upswing now but more diversification is needed.  The old adage of too many eggs in one basket is weighing on this stock.

[Divies]

In my view it will take years , maybe 10 o more before this will become a concern. They will have plenty of time to adjust their business model if they see a trend but I truly don't this will be an issue for a very long time. Don't forget, they also do tire changes and other services , it's not just oil changes. Cheers

[Tommy123]

This post has been removed in accordance with Community Policy

[Divies]

Furthermore, EVs will also require lubricants and the Mr. Lube type businesses will adapt. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/ev-fluids-say-goodbye-to-the-oil-change

[hawk35]

Hi Divies. EV is actually a concern now for DIV.  The market is weighing heavy on DIV with so much riding on one company.  And that one company is facing unanswered questions.  The market doesn't like unanswered questions. The dividend is safe for a few years but I don't see much share price appreciation due to this overhanging issue.  I'm holding back from

[Divies]

Hi Hawk, we will have to agree to disagree. IMO the only reason this is down is due to overall market sentiment. They had a fantastic quarter and they expect all of their Royalty partners will continue to do well going forward. I foresee a one or two dividend increases before the end of the year and a $ 3.50 + stock price IMO. I guess time will tell. Cheers

[Capharnaum]

It will take a while for EVs to take over for multiple reasons. The first reason is the manufacturing capacities. It takes around three years to convert a plant to EV production. To back that production, you need battery manufacturing facilities as well. While many plants are being converted, the production in 2025 will still be limited for new vehicles. The second reason is the metals mining

[lastpick]

Check out Graphene Manufacturing Group (GMG). They claim to have developed a battery to replace the Li batteries (graphene and aluminum). Might be an answer to your concerns!

[Capharnaum]

I'm aware of that, but before it gets mass produced for use in cars we're looking at around 10 years. Takes a very long time to develop a technology, get it up to standards, test it out and then build assembly lines/plants.

[Gladiator3]

If it paid a Dividend I would of consider it.    

[Shirtlessnomore]

Agreed, furthermore if your batteries are dead you cant drive, currently that in it's own is garbage to me and still requires a back up gasoline engine and will for a long time, thus oil changes are going nowhere anytime soon.

[Shirtlessnomore]

There is no unanswered questions, if you look closely at what's occurred with mr Lube you will notice this being addressed in the " + tires" part, clearly they are moving forward and have a plan, the issue has nothing to do with DIV and everything to do with fear, sidelined money and supply chain problems dragging everything everywhere down, this price going on here is not a DIV

[hawk35]

Oh there are unanswered questions.  Here is the big one.  Today the main product for Mr. Lube is oil, air filter and oil filter change.  It must to be done every three to six months depending on driving habits.  The industry calls this a "captive" customer.  Mr. Lube offers convenience and prices their  service lower than dealers and other outlets to bring

[Divies]

Hawk 35. This article gives you an opinion on how long it will take for oil change service companies to be impacted by EVs. It also discusses how they can quickly adapt to service the EV market. The view in this article is consistent with my opinion( see my previous post), that we are likely at least 10 years away from this being of any concern to these businesses. The big successful chains like