Diversified Royalty Corp T.DIV

Time for stockholder dilution again?

[hawk35]

It was February this year when they did a stock issue to cover their recent acquisition the previous year.  Stock today is very close to a 52 week high.  More dilution coming up soon?  If you think so it might be time to take profits.

[JayBanks]

  Technically, every month they somewhat dilute with shares issued through the DRIP program, if your not in the DRIP program... (Not a DRIPer myself) And why would they need to dilute (beyond the DRIP) anyway? They have $16.2 million cash on hand with no loans and Convertable Debentures that aren't due until 2027... I believe the current cash on hand is above normal since I've

[hawk35]

Hi JayBanks.  Not trying to cause fear.  This company grows through acquisitions.  They finance a big part of it by issuing stock  usually10% below the current trading price.  They usually raise the dividend after each acquisition but the SP never really appreciates much.  This is their business model. Its been a while since the last acquisition.  I just

[nedstar71]

The only problem with that is I think the timing has a lot to do with the specifics and availability of the deal itself than the share price that finances it.  Sure they would prefer to dilute at higher prices but I believe they've done it at $2.80 a couple of times too.  I doubt they'd do a deal if the share price was much lower than that but who knows. Overall the business

[JayBanks]

Well I'm still in the camp I wanna see more deals, and I don't want to dilute to do it. We have a strong base, I'm ok with paying 6-9% interest on a loan that should get paid off fairly quickly just letting it run. And then getting the payout bump for the new royalty when the loan is pretty much run out. But that's not how they seem to want to do things...   Usually around

[nedstar71]

I don't follow.  What do you mean when you say " I'm ok with paying 6-9% interest on a loan that should get paid off fairly quickly just letting it run."

[JayBanks]

6-9% is likely the rate to hold a balance on the acquisition lending facility, it can be looked up in the MD&A or anouther document, but I just gave an expected range... There is no real reason to dilute unless you have multiple deals happening in a short period, the 2 latest deals have been around a year apart, no reason they couldn't have just held a balance and payed off with the

[nedstar71]

It was the part I put in bold that I wasn't following  "that should get paid off fairly quickly just letting it run."

[JayBanks]

What is difficult to follow on it? On the current dividend/Distributable cash, they did not distribute $654,000, the previous quarter was $1.32 M... They they make an acquisition and the new royalty will add to the Distributable income number, and without adding to the dividend payout until after the debt is payed off, Maybe that difference is between $1.5-3M...    If they were to

[nedstar71]

You're right, it's all so simple < sarcasm While I'm not an expert by any means, I think you often tend to somehow both overcomplicate and oversimplify things at the same time.  With so much breathing room and ease of quick and efficient payback options, it's a wonder why their long term bank loans carrying amount as noted went from $109 million in Q3 2022, to $153 million

[JayBanks]

  You’re not the first to point that out and I do not disagree with that, I am a simple yet overly complicated individual in general...   I’m not fully aware of the inter-workings of those term loans, it seems like we are the co-signer or administrator of those loans to some degree, and the interest from them does seem to show up on our balance sheet, but they do not really effect

[nedstar71]

The somewhat convoluted and twisted workings of their balance sheet and debt instruments I won't even pretend to understand.  I recall some overlap from the Mr. Lube credit being used to extend debt to one of their other recent royalty agreements but can't be bothered figuring out which. My main point is that this isn't a buy a royalty and pay down the debt fast with the tight

[JayBanks]

You say I’m over complicating this… *eyeroll*   Ignore the term loans, to the best of both our knowledge (which is limited) they are doing nothing that meaningful to us in the grand scheme of things.   Let’s simplify it to the things that affect us. Our value and potential based on what info we know we can use.   So your saying XYZ is gonna cost us $50M, and your taking

[nedstar71]

I think you're winning me over. Those bank loans I was stuck on that have gone from 109 million to 175 million over 2 years being about +66ish million.  This does make sense as they diluted to the tune of $100 million during that period but purchased both Stratus and Barrburrito also during that time for $60 million plus $108 million so $168 million leaving $68ish milllion in new debt, so

[dogatcat]

Great analysis and we pretty much know that the Bank of Canada is cutting by 1/2 % again next meeting, possibly 3/4%!    Lower interest rates here in Canda a no brainer and DIV is a STORNG BUY here.