TMFDeej (99.47)

A resonably safe 6% yield

March 28, 2012 – Comments (1) | RELATED TICKERS: TAC

While I have marked what I believe are my very best ideas, and as a result current real holdings, with the good old "Top Pick" mark I like to keep the pedal to the medal here in CAPS, throwing as much stuff at the wall as possible in my search for real-world investment ideas.  Once again I am approaching the 200 pick limit, all with at least some sort of pitch I might add :).

Here's an idea that I came up with while perusing the 52-week low list this afternoon: the Canadian power company TransAlta Corp (TAC). Keep in mind that I just found this one a few hours ago so I am still in the preliminary stages of doing research on it.

I don't see any specific catalyst that will lift TransAlta's stock in the short term, but it certainly appears to be oversold to me at this point. Here we have a company that pays a massive 6% dividend and yet has a very low payout ratio.

The fact that TAC generates half of its electricity using coal bothers me somewhat, but it is in Canada and not the United States so I don't believe that it will be impacted by the new U.S. EPA regulations. I'm sure that Canada has its own regulations restricting coal, but as a fuel source coal is actually really cheap right now, which theoretically should be good for the company.

Continued low power prices shouldn't hurt TAC much either. It has pre-sold its 86% of its power capacity for 2012, 78% for 2013, 73% for 2014 and 67% for 2015.

TAC isn't going to knock your socks off, but it looks like a fairly stable way to generate 6% in a low-yield environment.

As I said, I'm still in the early stages of looking into this one.  Is anyone out there familiar with TAC?  If so, I'd love to hear your thoughts.

Thanks for reading and have a great evening everyone!

Deej