November 22nd, 2010 | 
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I am going to do a five part series on 5 income trusts as I wait to see how they will convert to a corporation (if they do) and what the impact to their dividends will be. They all tend to have an above average yield at the moment if you were to compare them with blue chip dividend aristocrats. I am curious how the prices and the dividends will be impacted once 2011 comes.I will cover the following potential investments:
- Part 1: Yellow Media (TSE:YLO) – Previously known as Yellow Pages Income Fund (TSE:YLO.UN)
- Part 2: The Keg Royalty Income Fund (TSE:KEG.UN)
- Part 3: Cineplex Galaxy (TSE:CGX.UN)
- Part 4: Inter Pipeline Fund (TSE:IPL.UN)
- Part 5: Liquor Store Income Fund (TSE:LIQ.UN)
One of them just converted recently and that’s Yellow Pages. They actually rebranded themselves during the conversion and are now Yellow Media (TSE:YLO) to reflect their business target.
Yellow Media (TSE:YLO)
Previously known as Yellow Pages (TSE:YLO.UN). This income trust has been paying consistently high dividends for a number of years. I have been following for years and have stayed away in fear that the yield was not sustainable. I want to look further into it to see if it is a worthy investment. I really like their new direction but the jury is out on their ability to grow and generate consistent dividends.
Their business segments are as follow:
- 71% Print Directories
- 21% Vertical Media
- 8% Online and Voice Directory
Quick fact sheet:
- Market Cap. 3.4B$
- P/E of 28.21
- Dividend Yield of 13.06% (for price of 6.13$)
- Trading at the 55% mark of its 52 week high and low.
Some analysts are rating Yellow Media as sector perform with a 1 year price target of 6.25$. That’s not much of an increase but you can get over 10% dividends. From what I can read, there is an expectation that the dividends will decrease in the coming years to bring the payout ratio in the 50% rather than the 80% average when it was as an income trust. Above is a graph showing the trends from 2006 to 2010 (Estimated). YLO had a big drop in 2009 and 2010 is questionable whether it improves over 2009. Recovery in advertising may be slow. The big question is whether or not the dividends are sustainable and if they can start growing the revenue again as it transform itself. Print directories will continue to exist but considering it is 71% of their business, it represents a large portion with limited growth in my view. Feel free to disagree as I would love to know more about potential growth in that segment. I believe that growth will be defined by the other 2 segments.
I would assume that the current price is reflecting future dividend cut which is why the yield is above 10%. [update] I just found out that in January the dividend payment will be $0.0542 down from $0.0667 to reflect a lower payout ratio. Before the decrease, the yield was nearly 13% and now it sits at 10%.
Readers: Any interest in Yellow Media? If you already have it, what do you like about the company?
Disclosure: No position in YLO at the time of writing
You couldn’t have been looking too hard at this stock. As of Nov22/2010 they had advised in an “earlier”MD+A that they would convert as of Nov 1/2010 (I think it was) and that they would continue to pay a dist’ of $.80 monthly til Jan1/2011 when they would start to pay a Div’ of $.65 with a payout ratio of 65%.
Hi Stu,
At the time of writing, it had converted and I mentioned that one of them converted already which was YLO.
I also had an update at the end when I found the information about the dividend reduction. The formatting is a little off unfortunately and I will fix that.
Hello there,
Have you looked at Just Energy JE: TSE)?
As a former Income Fund (JE.UN), until its conversion to a high divident paying corporation in January 2011(JE on TSE), it has consistently paid out solid monthly dividends ($0.1033/month).
As of January 2011, it has converted into a corporation and is keeping its same pay-out at $0.1033/month.
It is expanding rapidly its business into the US.
I have not found anything better so far…what do you think???
Thank you for your comments…and who knows, this might be a helpful tip for your readers???
Hubert
I have and I own it. It’s matter of paying attention to their customer attrition rate. The low gas prices have started generating articles that it’s not worth it for customer to lock into a price but I think their involvement with the business side is going to help balance that.
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