New Stock Purchase: Diversified Royalty

Diversified Royalty

Diversified Royalty Corporation

Today I added to my position in Diversified Royalty.  I’ve already written about this company multiple times, so I wont bore you with what they do, or why I like this company so much.   You can read my previous posts about Diversified Royalty HERE and HERE

Today I picked up 356 shares for 3.04 each in my TFSA account.  I’ve owned Diversified Royalty for a couple of years now, and the only concern I have had with the stock was the payout ratio. Those concerns were alleviated last week, when they announced a new royalty deal with “Nurse Next Door” that would push the payout ratio below 100%.  On top of that, they also announced a small dividend increase of 3.4% as well!  Lastly they also announced a new credit line available to them so they can seek out other royalty deals.

Lots of good news, the only downside was they announced this at end of day Friday, and by the time I got my order in, the stock already jumped over 5%.  Oh well, short term pain for long term gain.

I expect the stock to continue to climb back into the 3.50 range for the next little while, and once another deal is announced and/or a few earnings releases come out, assuming everything goes as planned the stock should continue to climb.  The royalty deals they have in place have all done relatively well (except Airmiles which has been sluggish/flatlining).

Mr. Lube has been a rock star providing strong growth each quarter, Sutton is continuing with slow and steady growth, and the royalty streams of both Mr Mikes & Nurse Next Door are poised to grow by 2% per year.

Dividend Yield & Stock Appreciation

Diversified Royalty currently offers a juicy dividend of 7.83% which will now be fully covered.  This purchase adds $79.03 to my yearly dividend income, although that will increase slightly once the dividend is increased.  I now own 905 shares of Diversified Royalty and will be dripping 5-6 shares per month depending on the stock price.

Cheers.

 

 

 

 

 

6 Comments on “New Stock Purchase: Diversified Royalty

  1. Nice buy! Me too, I was concerned about the payout ratio. I didn’t like how they were paying out from reserves. With the new deal in place they should be fine covering the dividend. I don’t think the raise was necessary, I’d prefer they saved extra cash for future deals. The yield is already high. Anyway, great buy, we’ll see how it will play out. They are on the path to $4.

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    • Yea, Payout ratio was the only thing holding me back from buying more. Once the deal closed I added to my position, and honestly if I had more cash lying around right now, I’d probably double it up.

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  2. I’ve always had a soft spot for Diversified, as I do with all stocks I was investing before I really figured out what I’m doing and what strategy I wanted to follow.

    The payout ratio should be the only thing really standing in the way of DIV trading at a 6-6.5% yield, but all royalty companies – with the exception of AW.UN – trade at much higher yields than I’d expect given interest rates. It wouldn’t surprise me to see Diversified reach $3.50, and arguably it should (the Mr. Lube royalty is one of the best out there and was a stroke of genius).

    Liked by 1 person

    • Agreed.

      I was a little nervous after the Mr.Mikes royalty deal, that didn’t bring the payout ratio down, but the new deal gave me a big sigh of relief (hence adding more shares). If it stays in the 3.00 range or lower, i’ll look to add more. I still don’t have as many shares as I’d like…

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