# Algonquin Power & Utilities Corp (AQN)



## Fraser19

Wondering if anyone holds this?
Seems like it has performed well over the past few year.
The P/E is high at 30 but it also has a beta of 0.17 and a 5.16% dividend. 

I have not had the chance yet the comb through the financials yet, but wondering what you guys think about it?


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## Beaver101

Yes, bought around $7.50 a year+ ago and held since, buy and holder here ... latest news (surprise) was dividend payment switched to US$, great for RRSP. Heard there was some business partnership with Emera (big electrical producer in NS) in the wind energy sector ... this needs to be verified though.


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## Fraser19

Hmmm I did not know about the US div.
Since the payment is in USD would there be the 15% withholding tax? Or not as it is a CDN company?


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## Beaver101

^


> Since the payment is in USD would there be the 15% withholding tax?


 ... not in an RRSP/LIRA but in TFSA for sure. It is a Canadian company that used to paid dividends in C$ but somewhere (not too long ago), it switched to paying in US$ which I found out by surprise as mentioned above. I'm a buy it, set it and forgetaboutit type of investor.


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## Spudd

Beaver101 said:


> ^ ... not in an RRSP/LIRA but in TFSA for sure. It is a Canadian company that used to paid dividends in C$ but somewhere (not too long ago), it switched to paying in US$ which I found out by surprise as mentioned above. I'm a buy it, set it and forgetaboutit type of investor.


No, it won't, the currency doesn't affect the withholding tax.


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## londoncalling

I thought there was an older thread than this but here are additional views

http://canadianmoneyforum.com/showthread.php/47170-Emera-or-Algonquin-Power?highlight=aqn

I have happily owned this one since 2012 with an ACB of 5.74 and enjoyed the dividends that have been paid and increased along the way. In the very short term it has held up better than others. I am still holding.


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## humble_pie

Spudd said:


> No, it won't, the currency doesn't affect the withholding tax.



there's always the hair-splitting exception that proves the rule!

theoretically canadian stocks paying USD dividends can be held in USD accounts, where they will *not* be subject to US NR withholding tax & where they *will* continue to generate those lovely canadian dividend tax credits.

this works fine at the big bank discount brokers, they have mainframes that can pick up on these fine-tuned details.

however IB cannot. One cmf member has posted a note he rec'd from IB saying such stocks will be subject to 15% WD if their clients hold em in USD account.

does anyone know what virtual broker does? how about questrade? i would, btw, not rely on what the representatives say they think is going to happen. I'd only rely upon what a trustworthy client source reported as historical fact, done & done.

returning to IB, the situation is not beyond repair. Obviously an Algonquin shareholder at IB would choose to hold shares in CAD account & pay the broker's FX on the dividend, because the alternative - pay 15% WH, lose eligible tax credits - is far worse.


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## doctrine

AQN announces 10% increase to their dividend (in USD)

Liking AQN here now that they have more substantial underlying cash flow. And I own shares now too.

http://investors.algonquinpower.com/file.aspx?IID=4142273&FID=34302375


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## noobs

I`m keeping my eye out for this..


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## NewBrunswick

I bought into this company last week. I plan to hold long term as well.


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## kelaa

Emera dumped a 50 million stake in Algonquin in a secondary offering (at 10.85) over the course of May 17 - May 18. It seems it sold fairly quickly. Today the huge trading volume appears to be some people offloading those shares for a quick profit.


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## doctrine

I have a slightly underweight position so I'm definitely interested in adding more if it pulls back. Nothing wrong IMO with Emera unloading most of their stake.


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## jerryhung

kelaa said:


> Emera dumped a 50 million stake in Algonquin in a secondary offering (at 10.85) over the course of May 17 - May 18. It seems it sold fairly quickly. Today the huge trading volume appears to be some people offloading those shares for a quick profit.


Can't sell those shares until they settle (5/24)

It's just normal for stocks to drop to the newest offer price

I got my allocations from TDDI .. may dump them quickly though, not enough % profit
asked 900 > 400 allocated
500 > 200
500 > 200


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## My Own Advisor

Owned for well over a year now. Happy to do so.


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## kelaa

jerryhung said:


> Can't sell those shares until they settle (5/24)
> 
> It's just normal for stocks to drop to the newest offer price
> 
> I got my allocations from TDDI .. may dump them quickly though, not enough % profit
> asked 900 > 400 allocated
> 500 > 200
> 500 > 200


Are you sure about not being able to trade the shares? In my account, it doesn't appear to be any different from a transactable security. The volume was at 9.7 million was almost 15 times average daily.


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## Daimao

I bought 85 shares at 11.41 the day before Emera dumped their shares. I am not too worried about the $1000, but I think i will have been well spent at that div yield and the pace the company is going at. The hydro plants/wind/solar plants are all in 10+ year contracts to sell their electricity from my understanding, which is some nice piece of mind. With COP21 putting the squeeze on oil/coal power liquid natural gas is going to be a big player in the near future too for providing cleaner but still consistent power output, and AQN has a few out West in the US and Canada.


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## 1980z28

All is good

In the last couple of week I have purchased 5200 shares and I am never wrong

IMHO


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## humble_pie

kelaa said:


> Are you sure about not being able to trade the shares? In my account, it doesn't appear to be any different from a transactable security. The volume was at 9.7 million was almost 15 times average daily.



one can sell shares one has just bought, even a split second after buying them. No need to wait for settlement date. I believe it's called day trading.

save & except ... some brokerages may not be set up online to be able to do this in registered accounts.


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## humble_pie

1980z28 said:


> In the last couple of week I have purchased 5200 shares and I am never wrong
> 
> IMHO




lol the voice from the root cellar speaks .each:

has spring come to The Rock yet, 1980?


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## 1980z28

humble_pie said:


> lol the voice from the root cellar speaks .each:
> 
> has spring come to The Rock yet, 1980?


I am now at less than a year for the move to retirement:

Just added another 1800 shares of aqn

Banks did not drop as I was thinking,,still have over 200k in trading account,
I have to learn new TD trading account

I did learn that so far this year I have made 149 trades
Lots of new info on new TD trading account,will take awhile to learn
old dog new tricks

Up to 1700 monthly div`s

starting to move to div`s for retirement,,,,and to stop trading and let things be

Will buy some AW.un soon

Can`t wait to retire will be 56 so old so little time


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## Eder

Algonquin = chicken dinner...all you can eat...they serve a buffet to the greenies.


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## Beaver101

^ ? ... chicken buffett for the greenies ... AQN is not an all renewable energy producer, is it?


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## hollyhunter

ALGONQUIN POWER AND UTILITIES C (AQN.TO) Uptrend remains intact. A break of 11.68 could move it up to 13.64 in short term.


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## Eder

Algonquin Power Company owns a direct or indirect equity interest in more than 33 clean energy facilities including:

wind
solar
hydroelectric
thermal

You can learn more about Algonquin Power Company by visiting www.algonquinpowercompany.com.

but ya not all rainbows & unicorns and hemp skirts


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## Beaver101

^ Yes, yes, yes, yes on these clean energy facilities - that's why I bought AQN in the first place (2012?). If they throw in an unicorn, that would be great too! :biggrin:


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## Eder

Looks like we are trading on the big board Nov 29...might be a good time to grab a few shares before then (sorry...nothing about Trump in this post)


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## doctrine

I have shares in this now. 5%+ yield and 10% growth projected out several years. Plenty of more contracts coming for them, most of which are at the state level. Kind of basing here and now trading just above the 10 day moving average for the first time in over three weeks.


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## My Own Advisor

Big fan of AQN. Worst case they get bought out by a larger player.


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## agent99

My Own Advisor said:


> Big fan of AQN. Worst case they get bought out by a larger player.


If changes in US Gov policy results in reduction of subsidies for renewable energy, would that not also be a concern? 

I was thinking about adding AQN to portfolio, but not so sure now.


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## My Own Advisor

Hard to say what the future has in store. My crystal ball is always very cloudy. I will continue to own it and DRIP it but I also index invest - just in case!


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## CPA Candidate

agent99 said:


> If changes in US Gov policy results in reduction of subsidies for renewable energy, would that not also be a concern?
> 
> I was thinking about adding AQN to portfolio, but not so sure now.


I wouldn't try to predict what Trump will do with energy in the next four years, but the long term trend towards renewables cannot be avoided or denied. An investment in a utility should be made with a view to long term value creation.


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## agent99

CPA Candidate said:


> I wouldn't try to predict what Trump will do with energy in the next four years, but the long term trend towards renewables cannot be avoided or denied. *An investment in a utility should be made with a view to long term value creatio*n.


Regardless, renewable energy companies ARE reliant on government subsidies. 

I agree with your statement above (highlighted), but I don't feel a company that is reliant on subsidies from an incoming government that denies climate change and has stated they will encourage coal usage would be one that will be guaranteed to create value over the long term.

Crossed AQN off MY list. I could be wrong, but why take the risk?

Good Luck to those who feel otherwise.


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## AltaRed

I think that risk is now baked into the price. Question is: Does AQN re-focus its development effort back in Canada? AB and SK in particular are going to have to have more renewables to offset some of the coal generation to be retired. Mixing gas turbine generation along with wind may be a palatable combination.


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## DigginDoc

I have some recent AQN in my tfsa. Does the US dividend cause any problems within the tfsa? Is there any withholding taxes? I use credential direct and couldn't find the info on the site.
Thank you for help.
Doc


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## AltaRed

AQN is a Canadian domiciled company. There would be no withholding taxes for Canadian residents regardless of what currency the dividends are paid. BUT you will likely incur a forex charge for converting the USD dividends to CAD in the TFSA (assuming AQN sits in the CAD side of your TFSA).


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## DigginDoc

Thanks for the info AltaRed. My whole tfsa is Canadian and the AQN site says they pay US and you would contact your direct site to change it to CDN. I will go with it in US. 
Cheers
Doc


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## AltaRed

DigginDoc said:


> Thanks for the info AltaRed. My whole tfsa is Canadian and the AQN site says they pay US and you would contact your direct site to change it to CDN. I will go with it in US.
> Cheers
> Doc


Credential Direct does not appear to have a USD side to their TFSAs http://www.credentialdirect.com/education/types-of-accounts/tfsa.aspx If not, then your USD dividends will be converted to CAD by Credential Direct.


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## DigginDoc

Thanks. I did see that after so I will just go with the flow. Good return anyway.
Cheers
Doc


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## hollyhunter

CIBC Boosts Algonquin Power & Utilities Corp (AQN) Price Target to C$14.00


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## TomB16

If I have AQN in a Canadian account, set to drip, will I pay 2x FX per drip?

My USD AQN is dripping nicely but I've been concerned about the FX so I haven't set it up for my CDN holdings.


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## AltaRed

TomB16 said:


> If I have AQN in a Canadian account, set to drip, will I pay 2x FX per drip?
> 
> My USD AQN is dripping nicely but I've been concerned about the FX so I haven't set it up for my CDN holdings.


Since it is the same stock wherever it is traded, and issues dividends in USD, why would you hold some on the CAD side of your account? Hold it all in the USD side of your account.


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## humble_pie

TomB16 said:


> If I have AQN in a Canadian account, set to drip, will I pay 2x FX per drip?
> 
> My USD AQN is dripping nicely but I've been concerned about the FX so I haven't set it up for my CDN holdings.



tomB i don't think anyone is likely to have an exact answer for you.

the issue of DRIPs for canadian interlisted stock that pays USD dividends as algonquin does, while stock is being held in CAD account, is far too subtle & complicated for this forum! even given the fact that forum is not bad at all with tricky situations!

last i looked into what happens with DRIPs was with potash. DRIPs were being administered by a financial services company in new jersey. Yes there were FX fees on the DRIPPed shares. This was back in the day when CC co-owned cmf forum & used to write about FX issues on his blogspot.

today, there are even slight variations among brokers in how they accept & process USD dividends & DRIPs for canadian interlisteds. IE never an easy answer. If you find anything out in algonquin, could you be kind enough to post in the forum.

.


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## AltaRed

FWIW, I hold AQN on the USD side of my Scotia iTrade cash account and the USD dividends are deposited 'in whole' into the account. No conversion to CAD and then back to USD. I watched closely for the first dividend to make sure this was the case. I don't DRIP but I assume (could be dangerous) that if I did DRIP, the USD dividends would be used to buy AQN shares on NYSE and not TSX.


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## humble_pie

AltaRed said:


> FWIW, I hold AQN on the USD side of my Scotia iTrade cash account and the USD dividends are deposited 'in whole' into the account. No conversion to CAD and then back to USD. I watched closely for the first dividend to make sure this was the case. I don't DRIP but I assume (could be dangerous) that if I did DRIP, the USD dividends would be used to buy AQN shares on NYSE and not TSX.




the above sounds good but the problem is that tomB is asking about FX on DRIP shares if he holds the shares in canadian account.

with a holding in CAD account, there would also be broker FX fees on the AQN dividends themselves, i believe.

possible FX fees on DRIP shares could be charged if algonquin uses a DRIP plan administrator located in the US, as was happening with potash. All would depend on where the new DRIP shares would be purchased.

i believe that, to get an accurate answer, tomB would have to inquire from AQN shareholder relations. Offthetopofmy head though, based on what tomB says about his USD DRIPPing, it looks as if AQN does have an american DRIP plan administrator.

i'm left wondering why bother with holding & DRIPPing AQN in canadian account, when USD account is working so well. Is it perhaps a case of registered vs non-registered holdings & tomB's broker is one of those who have not yet offered dedicated USD registered accounts.


.


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## AltaRed

I am aware of what Tom is trying to do..... I am suggesting he keep it on the USD side of his account (seems he already has AQN somewhere in a USD account). If his brokerage doees not yet have a USD side to his account, it may be time to change brokerages, or just accept there could be a forex fee.

I do agree with you he should talk to his brokerage AND most likely AQN Investor Relations.


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## TomB16

I appreciate the help. Thank you.

I have a bunch of accounts at TDDI and some of them don't have American sides. It is not possible to reduce the number of accounts. Not all of the accounts have US sides, or I would journal these shares across.

BTW, Humble Pie, I couldn't agree more with your assessment of the expertise in this forum. I assumed someone would have the answer so I took the lazy route and posted the question. I'll be on hold for 20m with TDDI but I'll report back with what they say.


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## OnlyMyOpinion

So you are saying you own AQN-TSX with a synthetic DRIP - is that correct?

My experience with 2,000 AQN-TSX held in the CDN side of a TDDI account (from the account statement) was that it paid $0.1059 US/sh dividends for $211.80 US on the reported pay date which was converted to $285.40 CDN. This then bought an additional 26 shares on TSX at $10.64 CDN for $276.64 CDN. 

I'm skeptical though because I make the exchange rate above to be 1.3475 (a dividend of $211.80 US became $285.40 CDN) on a day when BOC showed a daily high of 1.3164. I can't imagine TDDI giving up a spare penny, let alone using an exchange rate that would pay me $285.40 rather than $278.81. 
The balance of dividend cash of $8.76 CDN ($285.40-$276.64) is not itemized anywhere on statements so it is impossible to actually confirm it remained in the account as cash because of numerous other transactions during the month.


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## TomB16

OK. Spoke with TD.

On the Canadian side, I am paying 1 x FX + 15% US witholding tax. That will not change with a DRIP.

Six months ago, they were not able to open an American side of this account. I asked. That's why I'm holding the TSE issue. Now, they can create a US accout so they will do so. Once done, I can journal the AQN:TSE to the US side where it will remain TSE issued stock but the distributions will remain in USD without the witholding tax or FX. To sell, it would make sense to journal back the CDN side so I don't have to pay the FX.

As to why they can't journal this across and have it transform into AQN:NYSE, I'm not sure.


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## TomB16

The TDDI trader I just spoke with tells me there is no FX with AQN on the CDN side.

Doesn't sound right.

OMO, I'm not sure what you're saying. It looks as though you didn't pay FX?

As for the FX, I believe the purchase happens 10 days after the dividend is paid? Perhaps the rate was calculated when the dividend was paid, instead of when the shares were purchased?

Also, thanks for the help.


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## gardner

TomB16 said:


> 15% US witholding tax.


On AQN? That makes no sense to me. There should not be any US withholding on this. It is a Canadian company, even when you trade it on NY in US$. They don't take 15% of my POT, AGU or MG US$ dividends.


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## humble_pie

TomB16 said:


> The TDDI trader I just spoke with tells me there is no FX with AQN on the CDN side.
> 
> Doesn't sound right.




it doesn't seem to be right. I don't own AQN but it's an interlisted canadian stock with a US divvy. Those are the shares we normally keep in USD account, because the dividends arrive in a bulk payment via the CDS system in USD only.

broker systems, when they distribute the USD bulk payment in pro-rated amonts as dividend payments to the beneficial owners of the shares, automatically apply an FX fee to dividends going into CAD accounts.

it's true that some broker reps, particularly the new ones without much experience, have not yet bent their minds around some FX phenomena, so they say things like the above. A rep with more experience will usually be more accurate.


.


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## humble_pie

TomB16 said:


> On the Canadian side, I am paying 1 x FX + 15% US witholding tax. That will not change with a DRIP.


someone else is saying upthread that a 15% US withholding tax applied to dividends paid by a canadian company would be wrong. I agree.

generally, brokers belonging to the big 5 banks are ok. Their systems can identify the dividends as canadian, even though the shares may be embedded in a USD account.

it's the smaller privately-owned brokers that may get into trouble. 

a related question is whether the investor will still receive his eligible canadian dividend tax credits, when his eligible shares are held in a USD account. The answer is that at the big bank brokerages, he will. At a small privately held firm, he may not.

.


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## Eder

OnlyMyOpinion said:


> So you are saying you own AQN-TSX with a synthetic DRIP - is that correct?
> 
> My experience with 2,000 AQN-TSX held in the CDN side of a TDDI account (from the account statement) was that it paid $0.1059 US/sh dividends for $211.80 US on the reported pay date which was converted to $285.40 CDN. This then bought an additional 26 shares on TSX at $10.64 CDN for $276.64 CDN.
> 
> I'm skeptical though because I make the exchange rate above to be 1.3475 (a dividend of $211.80 US became $285.40 CDN) on a day when BOC showed a daily high of 1.3164. I can't imagine TDDI giving up a spare penny, let alone using an exchange rate that would pay me $285.40 rather than $278.81.
> The balance of dividend cash of $8.76 CDN ($285.40-$276.64) is not itemized anywhere on statements so it is impossible to actually confirm it remained in the account as cash because of numerous other transactions during the month.


Investors Edge paid me $277.88 on Jan 13th on 2000 shares.


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## OnlyMyOpinion

TomB16 said:


> ... OMO, I'm not sure what you're saying. It looks as though you didn't pay FX?...


That's right, I meant that I didnt see evidence of an onerous exchange rate (fx charge), and in fact the rate apeared better than I would expect. I can't say why but the numbers are what they are. 
I'm trying to simplify our accounts over time and will eventually unwind the US side (T1135 reporting, acb, etc.) so bought and will keep AQN on the Cdn side. We have sufficient USD now for our anticipated needs.


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## TomB19

Thank you OnlyMyOpinion, for sharing your experience.

It appears the TDDI trader I spoke didn't quite have a grip on this.

Once again, thank you to all who have taken the time to help. I greatly appreciate it.


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## OnlyMyOpinion

Eder said:


> Investors Edge paid me $277.88 on Jan 13th on 2000 shares.


That is the same payment date I was quoting. Interesting, that's closer to what I would have expected, yet my statement says I received $285.40. I wonder if a charge is buried somewhere. As I said it is impossible to actually confirm that cash of $8.76 was left in the account after the DRIP used $276.64 of the dividend.

View attachment 14626


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## humble_pie

OnlyMyOpinion said:


> My experience with 2,000 AQN-TSX held in the CDN side of a TDDI account (from the account statement) was that it paid $0.1059 US/sh dividends for $211.80 US on the reported pay date which was converted to $285.40 CDN. This then bought an additional 26 shares on TSX at $10.64 CDN for $276.64 CDN.
> 
> I'm skeptical though because I make the exchange rate above to be 1.3475 (a dividend of $211.80 US became $285.40 CDN) on a day when BOC showed a daily high of 1.3164. I can't imagine TDDI giving up a spare penny, let alone using an exchange rate that would pay me $285.40 rather than $278.81.
> 
> The balance of dividend cash of $8.76 CDN ($285.40-$276.64) is not itemized anywhere on statements so it is impossible to actually confirm it remained in the account as cash because of numerous other transactions during the month.




i'm wondering whether the reason for your beneficial rate (above) was because of the record date FX rate vs the payable date FX rate.

this is one of the trickiest points in all of USD dividendland, but onlyMO is one who will get it, i believe.

at the moment it's known that a very few companies among the canadians that pay USD dividends ... extremely few ... brokers do not know which companies they are ... these companies have taken it into their heads following some complaints from broker client shareholders ... to convert their USD dividends into CAD in their own treasury departments, at beneficial spot rates, at their own expense ... for certain brokers but not for all brokers ... before sending the bulk dividend payments out to brokers via the CDS system.

brookfield, BAM.A/BAM & potash are examples of this.

the result is a total effyouseekayyoupee. Nobody knows what a particular company is going to do with which broker. Brokers themselves have no clue & their agents can't explain or deal with the phenom. For example, Potash divs were reportedly sent to royal bank broker in CAD as of a year ago but to all other brokers in USD. Brookfield divs are being sent to TD broker in CAD but to other brokers in USD.

i'm wondering whether it's possible that Algonquin is another among the tiny handful of mystery companies who are secretly trying to be helpful in this manner. These companies tend to convert their USD dividends as of the record date, not as of the payable date. This could account for onlyMO's favourable conversion rate.

keep in mind, though, that if this is the case, FX spot rates can go against the shareholder as well as favour the shareholder.

.


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## Jaberwock

According to the AQN website, you have the option to receive your dividends in CDN.

Brookfield's website says that it will pay shareholders who have accounts in Canada in CDN, and those in the USA in USD, unless the recipient requests otherwise. Conversion will at BoC mid-day rates on the record date.

Dividends from my Brookfield shares last month (with CIBC) were shown on the statement as USD, but were converted to CDN at about the BoC rate on the distribution date (slightly better than the rate on the record date). I am keeping an eye on this to see if we get ripped off by CIBC. So far all is good.

I haven't received a div from AQN since CIBC changed over to having both US and CDN accounts in RRIF. I will be checking the Fx rate used when the dividend comes in later this month.


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## humble_pie

Jaberwock said:


> According to the AQN website, you have the option to receive your dividends in CDN.



might i caution you not to be misled by this kind of message, which many USD-dividend-paying companies still display on their websites.

99% of the time, messages about a dividend currency choice are for registered shareholders only.

registered shareholders are yesteryear. Today, nearly all retail shareholders are holding shares in street, ie in brokers' names at brokers. These shareholders - who are the majority now - have no option to select the currency of their dividend. They have to take what the broker gives them.

the entire story about brokers charging hidden FX on USD dividends paid by canadian companies is a very recent phenomenon. The IIROC has been encouraging all parties to be more transparent & fair to shareholders. 

the brokers have responded to IIROC encouragement by pointing their fingers at USD dividend paying companies & saying It's Their Fault. These companies, say the brokers, are the guilty parties who decided to issue their dividends in USD, therefore the guilty must clean up their mess.

the IIROC has apparently bought this argument. Encouragement of companies to clean up their dividend conduct is underway. So far, a few companies such as brookfield & potash have tried to comply. 

there is colossal disinformation everywhere on this topic. A couple of years ago i discovered that at least one transfer agent has gotten into the act, mistakenly informing companies such as brookfield that we retail investors at discount brokers are allowed to choose our dividend currency. However, this is not the case.

what makes the situation worse is that the dividend issuing companies who are doing their own dividend conversions, at their own expense, are not being consistent about which brokers they are doing this for.

brookfield itself is even more nightmarish since some brookfield companies - BAM itself for example - are trying to do the above, whereas other brookfield companies are not. At least, not yet.






> Brookfield's website says that it will pay shareholders who have accounts in Canada in CDN, and those in the USA in USD, unless the recipient requests otherwise. Conversion will at BoC mid-day rates on the record date.



keep in mind that the "request otherwise" option is strictly for registered shareholders. Retail investors like us who hold street shares at brokers have no such choice. We have to take whatever dividend the brokers deliver.

.


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## OnlyMyOpinion

Thanks Humble. Your comments prompted me to search a bit. I see that John Heinzl addressed this in a G&M article back in Dec 2014 that explains it well:
_
Unless you give your financial institution instructions otherwise, there’s a good chance you will continue to receive the dividend in Canadian dollars... My discount broker gets the dividend in U.S. dollars from Algonquin and then converts it to Canadian dollars on the payment date... There’s a downside to this, however: When converting currencies, brokers typically use an exchange rate that is favourable to them... This can add about 1.5 per cent or more in foreign exchange costs....

There is another way to receive Algonquin’s dividend in Canadian currency... “beneficial shareholders” – those whose shares are held by a financial institution – can contact their broker and request the Canadian-dollar equivalent of the dividend... the broker receives the dividend after the currency has already been converted to Canadian dollars by Algonquin’s transfer agent. The broker then passes the Canadian cash directly on to you, without making a profit... the conversion is based on the Bank of Canada noon exchange rate on the dividend record date – not on the dividend payment date...

Unfortunately, not all bank-owned brokers are making the Canadian currency option available, said Kelly Castledine, Algonquin’s director of investor relations. “We set it all up with CDS [Canadian Depository for Securities], so it’s doable. All the operations are in place to do it. It’s just that the banks don’t want to because they don’t get the FX [profit],” she said._

http://www.theglobeandmail.com/globe-investor/investor-education/can-i-still-get-my-algonquin-dividend-in-canadian-dollars/article22164168/

Now, when I use noon BOC 1.3427 on record date 30/12/2016, I get $284.38 CDN, much closer to the $285.40 I was paid. 
It is still $1.02 less, which leads me to conclude that I really, really like this transfer agent.


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## OnlyMyOpinion

Eder said:


> Investors Edge paid me $277.88 on Jan 13th on 2000 shares.


Eder - based on Humble's insight, you might want to call up CIBC and ask how your AQN dividend is being converted and paid. It could be that you can get another 6 or 7 bucks?


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## humble_pie

OnlyMyOpinion said:


> Thanks Humble. Your comments prompted me to search a bit. I see that John Heinzl addressed this in a G&M article back in Dec 2014 that explains it well:
> _
> Unless you give your financial institution instructions otherwise, there’s a good chance you will continue to receive the dividend in Canadian dollars... My discount broker gets the dividend in U.S. dollars from Algonquin and then converts it to Canadian dollars on the payment date... There’s a downside to this, however: When converting currencies, brokers typically use an exchange rate that is favourable to them... This can add about 1.5 per cent or more in foreign exchange costs....
> 
> There is another way to receive Algonquin’s dividend in Canadian currency... “beneficial shareholders” – those whose shares are held by a financial institution – can contact their broker and request the Canadian-dollar equivalent of the dividend... the broker receives the dividend after the currency has already been converted to Canadian dollars by Algonquin’s transfer agent. The broker then passes the Canadian cash directly on to you, without making a profit... the conversion is based on the Bank of Canada noon exchange rate on the dividend record date – not on the dividend payment date...
> 
> Unfortunately, not all bank-owned brokers are making the Canadian currency option available, said Kelly Castledine, Algonquin’s director of investor relations. “We set it all up with CDS [Canadian Depository for Securities], so it’s doable. All the operations are in place to do it. It’s just that the banks don’t want to because they don’t get the FX [profit],” she said._
> 
> http://www.theglobeandmail.com/globe-investor/investor-education/can-i-still-get-my-algonquin-dividend-in-canadian-dollars/article22164168/
> 
> Now, when I use noon BOC 1.3427 on record date 30/12/2016, I get $284.38 CDN, much closer to the $285.40 I was paid.
> It is still $1.02 less, which leads me to conclude that I really, really like this transfer agent.



actually this forum has been on the hidden-FX-fees-on-USD-dividends case since at least 2012. 

this latest wrinkle in the history involves a tiny handful of companies who are trying to comply with IIROC encouragement that they should be more fair to retail investors whose shares are held in street. I've mentioned the known companies, AQN might be another.

i don't post too much about this wrinkle because it really is nightmarishly tricky. Keeping on top of which company is doing what & with which broker is like trying to work a thousand-piece jigsaw whose design has not yet been decided upon.

basically it means that:

a) investors should know which are the 26-30 or more canadian companies that pay USD dividends;
b) as a general rule shares in those companies should be kept in USD accounts; 
c) however there are a few exceptions (brookfield, potash);
d) because of IIROC encouragement, there are likely to be more exceptions in the future;
e) no one knows which companies are the exceptions, or are going to be exceptions;
f) discount broker call centres know nothing about any of this;
g) sometimes the dividend-paying companies themselves don't know what's going on, therefore misinform investors.


all in all, just a regular day down on the farm. It was when i saw your name, onlyMO, that i thought i'd dare to venture forth on the topic once more, because i knew you'd understand. Jabberwock also.

.


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## Eder

OnlyMyOpinion said:


> Eder - based on Humble's insight, you might want to call up CIBC and ask how your AQN dividend is being converted and paid. It could be that you can get another 6 or 7 bucks?


I think I'm getting screwed...what else is new from CIBC...thanks HP & OMO.


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## My Own Advisor

Agreed with HP. This seems to come up many times in the forum:

When in doubt, hold CDN stocks that pay dividends in USD (26-30 or more canadian companies that pay USD dividends) in USD $$ accounts. Avoid the mess, time and energy spent in worrying about conversion charges and emailing investor relations departments.


----------



## humble_pie

My Own Advisor said:


> Agreed with HP. This seems to come up many times in the forum:
> 
> When in doubt, hold CDN stocks that pay dividends in USD (26-30 or more canadian companies that pay USD dividends) in USD $$ accounts. Avoid the mess, time and energy spent in worrying about conversion charges and emailing investor relations departments.




no, the above is history as of 2-3 years ago. Reality has moved on & today the New Reality is different.

nowadays there are exceptions to the keep-canadian-companies-that-pay-USD-dividends-in-USD-accounts rule. There are going to be more & more exceptions. I've explained why in posts just upthread. The IIROC is involved in the mess now.

advisor, could you please do a favour here? i'm about to post a note to onlyMO, who is making a somewhat similar mistake. I'm trying to recruit both of you to the New Reality, which is that the payment of USD dividends differs nowadays from broker to broker & the current situation is a royal effyouseekayyoupee mess.

the topic is too big & too messy for one poor pie to handle alone. I'd love to see knowledgeable recruits, but they should be willing or able to get the story straight first of all. The way i see it, us old phartz have an obligation to report truthfully to cmf readers. I'll post more about what's currently happening in a moment.


.


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## humble_pie

OnlyMyOpinion said:


> Thanks Humble. Your comments prompted me to search a bit. I see that John Heinzl addressed this in a G&M article back in Dec 2014 that explains it well:
> 
> _ " Unless you give your financial institution instructions otherwise, there’s a good chance you will continue to receive the dividend in Canadian dollars... My discount broker gets the dividend in U.S. dollars from Algonquin and then converts it to Canadian dollars on the payment date... There’s a downside to this, however: When converting currencies, brokers typically use an exchange rate that is favourable to them... This can add about 1.5 per cent or more in foreign exchange costs....
> 
> " There is another way to receive Algonquin’s dividend in Canadian currency... “beneficial shareholders” – those whose shares are held by a financial institution – can contact their broker and request the Canadian-dollar equivalent of the dividend... the broker receives the dividend after the currency has already been converted to Canadian dollars by Algonquin’s transfer agent. The broker then passes the Canadian cash directly on to you, without making a profit... the conversion is based on the Bank of Canada noon exchange rate on the dividend record date – not on the dividend payment date...
> 
> " 'Unfortunately, not all bank-owned brokers are making the Canadian currency option available,' said Kelly Castledine, Algonquin’s director of investor relations. 'We set it all up with CDS [Canadian Depository for Securities], so it’s doable. All the operations are in place to do it. It’s just that the banks don’t want to because they don’t get the FX [profit],' she said."_
> 
> http://www.theglobeandmail.com/globe-investor/investor-education/can-i-still-get-my-algonquin-dividend-in-canadian-dollars/article22164168/





oh dear. I've only just now had time to read OMO's 2014 quoted article above, from the globe & mail's john Heinzl. Unfortunately, it is 100% wrong. Alas heinzl is not the only party with this kind of misinformation & imho it should be stopped. It's a false meme.


*here's the fax, ma'am: retail investors at any kind of broker - discount or full-service - do not have any choice when it comes to the currency of each individual stock's dividends in their portfolio.*


this should resonate with all cmffers & especially with onlyMO, who is a highly observant person, right?

Q: when, upon buying a new position in a canadian stock with US dividends such as Algonquin - or any other from a list of at least 26 to 30 interlisted stocks - have investors ever received a sweet little memo from their broker inquiring solicitously what kind of currency would you like your dividend to be paid in?

A: never.


that's right, there is no dividend currency choice for broker clients who hold their shares in street or nominee form, which means the shares are registered in the broker's name, not the name of the ultimate beneficial owner.

only registered shareholders sometimes have a choice of currency, if a company decides to offer that choice directly.

but broker clients have no choice whatsoever. Zero. Nada.

what a shocking mistake for the globe & mail to make. Tch.


.


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## humble_pie

*are your interlisted dividends at risk for FX fees? here are more fax ma'am*

.

just upthread i've posted about the New Reality with cross-currency dividends & about their Recent History, but here we go again.

keep in mind that brokers receive one bulk dividend payment from the CDS system, in one currency or the other currency. Brokers do *not* receive dividend bulks in 2 currencies & broker clients may *not* elect to receive in the currency of their choice.

what has been happening these past few years - oh, maybe 5 or 6 years, ever since investors kicked up a fuss over broker FX fees on canadian dividends in this forum - is a low-key, ongoing conversation among brokers, the issuing companies who are canadian interlisted stocks & the IIROC, which has been attempting to deal with investor complaints.


_*Brokers Blame the Companies*_

the brokers took the position that it was their right to charge FX fees on incoming dividends where applicable. Brokers pointed fingers at the dividend-issuing interlisted canadian companies & said the Problem was the Companies' Fault. The companies - said the brokers - were the parties who had decided to issue dividends in USD instead of traditional CAD in the first place. Therefore the companies - said the brokers - should be the ones to clean up their own mess.

keep in mind that the IIROC is actually the brokers acting in concert. Finance is a self-regulated industry. So in this case, the IIROC favoured its own members, who are the brokers.

now starts the New Reality. The IIROC keeps encouraging companies that pay USD dividends to Be Nice to Street Shareholders.


*New Dividend Reality*

gradually, in very recent years, some of the companies have indeed tried to do better for retail clients like ourselves, whose shares are held in street form at brokers. These companies thought that they should convert their USD dividends to CAD themselves, in their own treasury departments, at spot rates, at their own expense, before sending the bulk dividend amounts out to brokers.

the question was, how would these companies decide which broker customers wanted which currency?


*Chaos Begins*

at this point, severe misinformation entered the picture. The companies themselves claim that CDS system representatives and/or certain transfer agents have informed them that certain brokers wish to receive CAD dividends because (the misinformation says) these brokers have surveyed their clients & their clients prefer CAD. 

the same CDS system representives and/or transfer agents are said to have informed the companies that certain other brokers have surveyed their clients & those other brokers desire USD divvies.

thus we investors end up with situations like brookfield (BAM.A) divvies are paid to TDDI in CAD but paid to other brokers such as BMO in USD. Similar story with Potash.

bref, all is chaos. Nobody knows what's happening.


*As of Today*

i find myself wondering how on earth so many people could be hallucinating that discount brokers lovingly & solicitously maintain expensive data bases indicating their clients' currency desires for each & every precious little dividend they are supposed to receive? 

the fact is the brokers don't give an essaitcheyetee about the currency of their clients' dividends. The reality is that brokers grab each bulk dividend payment sent to them from a company's treasury department via the CDS system & process it immediately. Brokers ruthlessly apply FX fees to clients whose destination accounts are not in the same currency as the bulk dividend payment. Brokers promptly distribute a pro-rated post-applicable-fee dividend amount into each client's account. The entire operation takes only a few hours.

only a few years ago, scribes like myself who worked to expose the above procedure, could safely suggest that investors who wished to avoid FX fees on dividends should keep those shares in the currency account of the dividend itself.

but no longer. Nowadays that rule is bye-bye. Gradually, as the IIROC exhorts its members to Act Nice to Shareholders, more & more companies will be deciding to do what brookfield & potash have done, which is convert their dividends themselves at head office. 

a huge problem arises today because A) brokers don't know what is going on & B) investors themselves don't know what is going on either.

do the companies announce changes to their dividend policy via public news releases? no they do not.

do their websites state the new facts? no they do not.

are broker call centres trained to handle this level of tricky, detailed information? no they are not.

how can investors find out what is happening with their dividends at any of the 25-30 canadian companies that pay USD dividends? chaotic as it may sound, a good place for decent information is a forum like this one. Pick your sources carefully, though.


.


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## Beaver101

My Own Advisor said:


> Agreed with HP. This seems to come up many times in the forum:
> 
> When in doubt, hold CDN stocks that pay dividends in USD (26-30 or more canadian companies that pay USD dividends) in USD $$ accounts. Avoid the mess, time and energy spent in worrying about conversion charges and emailing investor relations departments.


 ... only if you knew ahead of time. AQN used to pay its dividends in C$ (simple enough) until it decided to pay in US$ and then the fx fun started for retail investors ... and I agree it's business as usual for discount brokers, more power and profits for them as with retail investors holding bank stocks ... the world remains round.


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## humble_pie

Beaver101 said:


> ... only if you knew ahead of time. AQN used to pay its dividends in C$ (simple enough) until it decided to pay in US$ and then the fx fun started for retail investors ... and I agree it's business as usual for discount brokers, more power and profits for them as with retail investors holding bank stocks ... the world remains round.



it's just one more responsibility that comes with being an independent investor.

one should inspect one's dividends regularly. If there's a change, find out why.

canadian companies are switching to USD dividends at the rate of molasses, so such inspection is not burdensome. There's perhaps one switch every year. An investor's odds of owning shares of the company that does make the switch are very low.

.


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## doctrine

I own AQN in Cdn$, and have been attempting to estimate the cost of the FX exchange. Figuring out when they exchange is one of the hardest parts; I've calculated -2% to +2% based on when I thought the exchange would occur, but currencies can easily fluctuate by 0.5% even within a day. In the end, its 2% of a 5% dividend yield, and potentially I'm out $20 of FX fees for close to $3,000+ of returns in 1 year, so I'll continue monitoring. I'm sure this adds up for the broker across all accounts but I doubt it's enough to make or break their business. I feel its important to be sure you're not being ripped off, but also feel a little bit that once you're comfortable with the cost, don't jump too far in and as they say let the tax tail wag the investment dog. Better to focus on whether AQN is a good investment, and if you lose 2% of your total dividend, it's probably going to be a rounding area in your total return. Thanks for the additional analsis here though


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## Beaver101

humble_pie said:


> it's just one more responsibility that comes with being an independent investor.
> 
> one should inspect one's dividends regularly. If there's a change, find out why.
> 
> canadian companies are switching to USD dividends at the rate of molasses, so such inspection is not burdensome. There's perhaps one switch every year. *An investor's odds of owning shares of the company that does make the switch are very low.
> *
> .


 ... I guess I was lucky on this one. As for finding out why the change/switch over - would it make a difference? I mean it's switched, it's switched at whatever fx conversion rate. It's not like I would be selling the stock because of the that.


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## humble_pie

Beaver101 said:


> ... I guess I was lucky on this one. As for finding out why the change/switch over - would it make a difference? I mean it's switched, it's switched at whatever fx conversion rate. It's not like I would be selling the stock because of the that.




perhaps there's a small misunderstanding here?

you won't really be "lucky" until you make sure that your broker is *not* charging you FX fees on each & every algonquin dividend paid to you as time passes.

it's often difficult to determine if brokers are charging FX on dividends since the fees are hidden. Broker call centre representatives are not trained to handle this issue & often do not reply accurately to questions.

there are thousands of posts & hundreds of threads in cmf forum over the years, explaining how to cure this situation.


.


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## humble_pie

doctrine said:


> I own AQN in Cdn$, and have been attempting to estimate the cost of the FX exchange. Figuring out when they exchange is one of the hardest parts; I've calculated -2% to +2% based on when I thought the exchange would occur, but currencies can easily fluctuate by 0.5% even within a day. In the end, its 2% of a 5% dividend yield, and potentially I'm out $20 of FX fees for close to $3,000+ of returns in 1 year, so I'll continue monitoring. I'm sure this adds up for the broker across all accounts but I doubt it's enough to make or break their business. I feel its important to be sure you're not being ripped off, but also feel a little bit that once you're comfortable with the cost, don't jump too far in and as they say let the tax tail wag the investment dog. Better to focus on whether AQN is a good investment, and if you lose 2% of your total dividend, it's probably going to be a rounding area in your total return. Thanks for the additional analsis here though





doctrine you're quite right when you say that broker FX fees on individual dividends for a single retail investor won't matter much. Particularly when a holding will only be held for a short period of time.

but many investors hold stocks across many years, even decades. Broker FX fees on dividends from such holdings are well worth stopping.

my reason for posting on this topic is that i'm approaching as a journalist, not as an investor. The area of hidden broker FX fees has become my special niche. 

when i first came to cmf forum in 2009, i thought everybody knew how to avoid FX by arbitraging currencies, aka gambit trading, between toronto & new york markets. I was taught this by senior traders at a brokerage house in the late 1990s. But in 2009, in this forum, i was astonished to observe that no one knew how to do this.

i also thought that everybody knew to keep their USD dividend canadian stocks in USD accounts, in order to avoid broker FX fees on the dividends. But it turned out that nobody on here knew about this strategy either, so i began posting in this forum.

some cmffers like to rant against banks in the abstract. What i prefer to do is try to show how some of the banks' more egregious FX practices can be avoided.

as for how profitable FX fees are for brokers, senior representatives over the years have always told me that FX fees, like margin borrowing, are lucrative revenue lines for brokers. The work brokers have to do to collect FX fees is minimal, since they are acting as agents for their banks.

more than 30 canadian companies now pay USD dividends. The names of most of these are household words such as potash, encana, fairfax. Their shares are widely held by millions of canadian investors across all brokerages. When one takes into account the total dividend stream from all such companies to clients at all brokers, the effortless 1% FX fees charged by brokers on these dividends loom large.


.


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## My Own Advisor

humble_pie said:


> doctrine you're quite right when you say that broker FX fees on individual dividends for a single retail investor won't matter much. Particularly when a holding will only be held for a short period of time.
> 
> but many investors hold stocks across many years, even decades. Broker FX fees on dividends from such holdings are well worth stopping.
> 
> my reason for posting on this topic is that i'm approaching as a journalist, not as an investor. The area of hidden broker FX fees has become my special niche.
> 
> when i first came to cmf forum in 2009, i thought everybody knew how to avoid FX by arbitraging currencies, aka gambit trading, between toronto & new york markets. I was taught this by senior traders at a brokerage house in the late 1990s. But in 2009, in this forum, i was astonished to observe that no one knew how to do this.
> 
> i also thought that everybody knew to keep their USD dividend canadian stocks in USD accounts, in order to avoid broker FX fees on the dividends. But it turned out that nobody on here knew about this strategy either, so i began posting in this forum.
> 
> some cmffers like to rant against banks in the abstract. What i prefer to do is try to show how some of the banks' more egregious FX practices can be avoided.
> 
> as for how profitable FX fees are for brokers, senior representatives over the years have always told me that FX fees, like margin borrowing, are lucrative revenue lines for brokers. The work brokers have to do to collect FX fees is minimal, since they are acting as agents for their banks.
> 
> more than 30 canadian companies now pay USD dividends. The names of most of these are household words such as potash, encana, fairfax. Their shares are widely held by millions of canadian investors across all brokerages. When one takes into account the total dividend stream from all such companies to clients at all brokers, the effortless 1% FX fees charged by brokers on these dividends loom large.
> 
> 
> .


Totally agree HP. Good posts by you!


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## Beaver101

humble_pie said:


> perhaps there's a small misunderstanding here?
> you won't really be "lucky" until you make sure that your broker is *not* charging you FX fees on each & every algonquin dividend paid to you as time passes.


 ... perhaps .. when I said "lucky", I had meant the "surprised" switch over in response to MOA's post that


> When in doubt, hold CDN stocks that pay dividends in USD (26-30 or more canadian companies that pay USD dividends) in USD $$ accounts.


 as well as yours post #69. And in particular your last one, which is contradictory with the issue at hand. 



> it's often difficult to determine if brokers are charging FX on dividends since the fees are hidden. Broker call centre representatives are not trained to handle this issue & often do not reply accurately to questions.





> there are thousands of posts & hundreds of threads in cmf forum over the years, explaining how to cure this situation.


 ... yes via NG but it would hardly be practical to do it with each dividend payment and as for requesting the now US$ dividends to be paid into an US$ account instead of being dinged fx conversions automatically, most brokerages don't have this option. Unless one NG the stock itself to US$. And so the brokerages still need to make their profits which is good for business all around, no?


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## humble_pie

Beaver101 said:


> ... perhaps .. when I said "lucky", I had meant the "surprised" switch over in response to MOA's post that as well as yours post #69. And in particular your last one, which is contradictory with the issue at hand.
> 
> ... yes via NG but it would hardly be practical to do it with each dividend payment and as for requesting the now US$ dividends to be paid into an US$ account instead of being dinged fx conversions automatically, most brokerages don't have this option. Unless one NG the stock itself to US$. And so the brokerages still need to make their profits which is good for business all around, no?




alas you do not seem to be getting it ...

arbitraging currencies via gambit trading is one strategy. It is not being discussed in this thread at the present moment.

keeping one's canadian stocks that pay USD dividends in the appropriate currency account is an entirely different strategy. Has nothing whatsoever to do with gambit trading. Investors should not confuse or mingle the 2.

broker FX fees on such dividends are what is being discussed here.

in the case of algonquin dividends, shareholders who wish to avoid broker FX fees on these need to first find out how their brokers are processing the dividends.


.


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## Beaver101

humble_pie said:


> alas you do not seem to be getting it ...
> 
> arbitraging currencies via gambit trading is one strategy. It is not being discussed in this thread at the present moment.
> 
> keeping one's canadian stocks that pay USD dividends in the appropriate currency account is an entirely different strategy. Has nothing whatsoever to do with gambit trading. Investors should not confuse or mingle the 2.
> 
> broker FX fees on such dividends are what is being discussed here.
> 
> in the case of algonquin dividends, *shareholders who wish to avoid broker FX fees on these need to first find out how their brokers are processing the dividends.
> *
> 
> .


 ... as a "customer" of a brokerage, I'm not interested in "how" or the "rocket science process" the brokers uses to process the dividends other than they handle (ensure of) the transfers of the dividends in my account. The only concern I have is what FX fees are charged and based on your earlier quote, I'm highly doubtful Fx fees can be avoided. Maybe there is a secret process of avoiding such fees for special investors. Unfortunately, I'm not one of them. 



> it's often difficult to determine if brokers are charging FX on dividends since the fees are hidden. Broker call centre representatives are not trained to handle this issue & often do not reply accurately to questions.


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## AltaRed

What HP has been trying to say is that forex fees on dividend payments from Cdn interlisted stocks that pay dividends in USD can mostly be avoided if one 'works' the system. Sometimes it is just a matter of putting that interlisted stock in the USD side of one's account. Other times, it takes effort with company Investor Relations and/or the brokerage. Maybe one cannot be lucky at all. Start by checking IF your dividends from POT, AQN, etc are being shortchanged by forex fees. Then ask the brokerage how to avoid that (may be as simple as putting the stock on the USD side of the account).

As an example, when I first bought my AQN stock, I journalled it over to the USD side of my account right after purchase and waited for the first dividend to arrive. I checked it to make sure I was not losing anything and I wasn't, so that was/is the end of the story for now. Had I found out I was losing 2 ways, e.g. first being converted to CAD and then back to USD for my USD side of my account, I would have attempted via the brokerage or investor relations to see if my dividend could stay in USD. IF not, then I would have moved AQN back to the CAD side of the account to only get dinged once on forex. Seems every interlisted stock paying out USD dividends has to be looked at individually, and I suspect (but don't know) if that process varies by brokerage.


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## Beaver101

AltaRed said:


> What HP has been trying to say is that forex fees on dividend payments from Cdn interlisted stocks that pay dividends in USD can mostly be avoided if one 'works' the system. Sometimes it is just a matter of putting that interlisted stock in the USD side of one's account. Other times, it takes effort with company Investor Relations and/or the brokerage. Maybe one cannot be lucky at all. Start by checking IF your dividends from POT, AQN, etc are being shortchanged by forex fees. Then ask the brokerage how to avoid that (may be as simple as putting the stock on the USD side of the account).


 ... first, your explanation is ALOT clearer, thanks. Yes, I could consider interlisting the stock(s) onto the US side now with CIBC Investoredge but given the high exchange rate, that doesn't seem to be ideal.

[/QUOTE] As an example, when I first bought my AQN stock, I journalled it over to the USD side of my account right after purchase and waited for the first dividend to arrive. I checked it to make sure I was not losing anything and I wasn't, so that was/is the end of the story for now. Had I found out I was losing 2 ways, e.g. first being converted to CAD and then back to USD for my USD side of my account, I would have attempted via the brokerage or investor relations to see if my dividend could stay in USD. IF not, then I would have moved AQN back to the CAD side of the account to only get dinged once on forex. Seems every interlisted stock paying out USD dividends has to be looked at individually, and I suspect (but don't know) if that process varies by brokerage.[/QUOTE] ... seems like this is the case with AQN with me - bought it with C$ to hold and DRIP ... until AQN decided to pay in US$ which means I do get dinged. But given my dividends only fetch a few bucks $10?, I'm not sure if it is worth my while (time and effort) to figure / calculate out the whole rigoramole, particularly it is in a TFSA also - is there withholding tax too? I would rather focus on getting the right investment/stock and what other big bucks fees (MERs, etc.). Perhaps if my dividends were in the hundreds, then it's a different story.


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## Beaver101

> As an example, when I first bought my AQN stock, I journalled it over to the USD side of my account right after purchase and waited for the first dividend to arrive. I checked it to make sure I was not losing anything and I wasn't, so that was/is the end of the story for now. Had I found out I was losing 2 ways, e.g. first being converted to CAD and then back to USD for my USD side of my account, I would have attempted via the brokerage or investor relations to see if my dividend could stay in USD. IF not, then I would have moved AQN back to the CAD side of the account to only get dinged once on forex. Seems every interlisted stock paying out USD dividends has to be looked at individually, and I suspect (but don't know) if that process varies by brokerage.


... seems like this is the case with AQN with me - bought it with C$ to hold and DRIP ... until AQN decided to pay in US$ which means I do get dinged. But given my dividends only fetch a few bucks $10?, I'm not sure if it is worth my while (time and effort) to figure / calculate out the whole rigoramole, particularly it is in a TFSA also - is there withholding tax too? I would rather focus on getting the right investment/stock and what other big bucks fees (MERs, etc.). Perhaps if my dividends were in the hundreds, then it's a different story.


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## AltaRed

Beaver101 said:


> ... first, your explanation is ALOT clearer, thanks. Yes, I could consider interlisting the stock(s) onto the US side now with CIBC Investoredge but given the high exchange rate, that doesn't seem to be ideal.


It makes no difference. AQN's market price on the NYSE is the same (within a few pennies of forex) as on the TSX (just quoted in a different currency). In theory, you can ask your broker to journal it back and forth 100 times and still end up with exactly the same value (except your broker will definitely* screw up Cost Basis as discussed elsewhere).

* Most, if not all, brokerages use the forex rate in effect at time of journalling between CAD and USD sides rather than the real cost basis, i.e. the forex rate on date of settlement of purchases. All investors need to be aware of this brokerage f**kup and keep their own ACB on journalled shares, and not rely on that of the brokerage.


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## AltaRed

Beaver101 said:


> ... seems like this is the case with AQN with me - bought it with C$ to hold and DRIP ... until AQN decided to pay in US$ which means I do get dinged. But given my dividends only fetch a few bucks $10?, I'm not sure if it is worth my while (time and effort) to figure / calculate out the whole rigoramole, particularly it is in a TFSA also - is there withholding tax too? I would rather focus on getting the right investment/stock and what other big bucks fees (MERs, etc.). Perhaps if my dividends were in the hundreds, then it's a different story.


There should be no withholding tax on ANY Canadian stock, whether the dividend is paid in USD or CAD. It is not the currency that matters... it is where the stock is domiciled and AQN is Canadian.


----------



## humble_pie

AltaRed said:


> There should be no withholding tax on ANY Canadian stock, whether the dividend is paid in USD or CAD. It is not the currency that matters... it is where the stock is domiciled and AQN is Canadian.




the big bank brokers can accurately handle canadian interlisted stocks in USD accounts. No withholding, full eligible canadian dividend tax credits. However, smaller privately-owned brokers may not have software that can cope.

a couple of years ago a cmffer quoted verbatim an e-mail he had received from Interactive Brokers, saying that their system would not be able to recognize a canadian stock being deliberately held in USD side of an account as canadian. The IB system at that time would therefore impose 15% fees as "US non-resident withholding tax" even though no US NR tax was in fact payable by the broker, said the IB e-mail.

furthermore the client would forfeit correct T5 tax slips setting forth the eligible canadian dividend tax credits on the very dividends the client was trying to protect from FX fees, said IB.

the situation may have improved since posting of that e-mail but in general clients of smaller non-bank brokerages should inspect these kinds of situations closely rather than accept bald generalizations from a chat forum (altaRed alas you seem to be repeatedly over-simplifying in this area, if i may say so ...each

.


----------



## AltaRed

Yes, I oversimplify partly out of intent to get the key message across, and partly because I tire of banging on the keyboard too much...probably because I post too much.... :stupid:


----------



## doctrine

More important for all of us (or me, at least), AQN set a new closing high today. Although it has outperformed the index by a huge margin over any period longer than a year or so, it has been lagging especially in the last 6 months but has more recently been outperforming for the last month. A good investment regardless of the currency of the dividend payment.


----------



## Eder

Our index has been a pig... value of my empty beer cans out perform it.


----------



## humble_pie

the globe's john heinzl corrected himself between his 2014 article quoted upthread - where he got a few things wrong - & this article in 2016, where he got things right.

here's heinzl's 2016 number. It's mostly accurate. I won't repeat what his earlier mistakes were. They're still causing confusion in the sector so it's best they should fade into oblivion.

http://www.theglobeandmail.com/glob...ian-stock-pays-a-us-dividend/article29499346/

.


----------



## jargey3000

...duh.... so, if I wanted to buy a few shares of AQN, is it better (simpler? less confusing? less frustrating?) for me to buy them on the NYSE , in US $, on US side of my (non-reg.) trading account? or on the TSX , in loonies, on the Cdn. side of my account?
Or, should i just STAY AWAY from AQN?


----------



## AltaRed

There is no difference buying in USD on the NYSE or in CAD on the TSX. It is the same stock with arbitrage taking out the bulk of currency differences. Which currency do you have available to spend?


----------



## jargey3000

AltaRed said:


> There is no difference buying in USD on the NYSE or in CAD on the TSX. It is the same stock with arbitrage taking out the bulk of currency differences. Which currency do you have available to spend?


have avail. $ in either US or Cdn.
just wondering - from all the discussion above - which would be _better_ route to go?


----------



## AltaRed

I have AQN on the USD side of my portfolio because AQN pays dividend in USD. But I purchased a partial position on the TSX because I had CAD available... I simply journalled it over to the USD side after settlement. IOW, it really makes no difference but you can save a step by purchasing it on NYSE in USD and leaving it on the USD side of your portfolio. Just be sure to make the purchase from the USD side of the portfolio in that case. 

I would now like to fill out that position (when the price is right) and if that was to happen soon, I have USD available now for that.....so I would then purchase it on NYSE from the USD side of the portfolio.


----------



## jargey3000

tks Red


----------



## booboo

AltaRed said:


> There is no difference buying in USD on the NYSE or in CAD on the TSX. It is the same stock with arbitrage taking out the bulk of currency differences. Which currency do you have available to spend?



But isn't there a difference, as I write this AQN is 11.04 US and 13.47 CDN; 13.47 CDN is showing as 10.85 US on my xchange rate. So according to this one is high/low. 

I've been watching this stock for a while and can't decide which way to go; i'm also not buying 1000's of stock so dividend xchange shouldn't be a big deal.


----------



## humble_pie

booboo said:


> But isn't there a difference, as I write this AQN is 11.04 US and 13.47 CDN; 13.47 CDN is showing as 10.85 US on my xchange rate. So according to this one is high/low.




the exchange calculator is showing you the commercial "buy USD" rate of 10.85. This has an invisible FX fee built in.

the AQN market prices - 13.47 & 11.04 - will work out very close to the true FX spot rate.

your financial institution appears to be charging you a fairly standard FX fee of just under 1%.


----------



## booboo

makes sense, thanks for the reply.

Maybe another dumb question but I've seen the dividend listed in CAD on Morningstar, the past 5 quarters are CDN, 6 quarters before that are US then again CDN way back. TD has the annual dividend as 0.47 US. I'm assuming it's still US though as previous posts suggest. If i'm wrong please let me know but i'm going with US


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## AltaRed

The dividend is in USD.


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## humble_pie

AltaRed said:


> The dividend is in USD.




the situation with algonquin dividend may be more complicated than above black-&-white statement. AQN may group with brookfield & potash in a trio of canadian stocks that do, initially, pay USD dividends; however these companies send certain brokers bulk dividend payments in CAD directly from their treasury departments.

altaRed, i believe you yourself have, in the recent past, confirmed that POT is paying clients of scotia Itrade dividends in CAD, with no FX fee being charged, is that not so?

if i am not mistaken, i believe that royal bank clients also receive POT dividends in CAD. If clients of these 2 brokers are unfortunate enough to be holding their potash shares in US accounts - hoping to receive USD dividends without broker FX fees - they will be disappointed.

yet potash is a USD dividend payor & most other brokers in canada are receiving their bulk POT dividend payments in USD.

brookfield asset management is another with a confused dividend payment history.

i've posted previously about these detailed circumstances, not going to repeat here.


----------



## AltaRed

I don't recall exactly. I've been out of POT for at least a few (if not more) years and don't trust my memory, but I tend to think so. 

In my case for AQN, I get the full USD dividend for shares held on the USD side of my account. I don't hold it on the CAD side so cannot comment about forex conversion commissions.


----------



## humble_pie

AltaRed said:


> I don't recall exactly. I've been out of POT for at least a few (if not more) years and don't trust my memory, but I tend to think so.
> 
> In my case for AQN, I get the full USD dividend for shares held on the USD side of my account. I don't hold it on the CAD side so cannot comment about forex conversion commissions.





i don't believe we're talking about the same dividend payment procedures though.

i believe that you're talking about the better-known procedure in which a canadian USD dividend payor sends its bulk dividend payment to brokers in USD, who then proceed to charge their own FX fees when they distribute the dividend in pro-rated amounts into canadian accounts that hold the shares?

the solution to this problem is to hold those shares in USD account. This workaround has been discussed/explained thousands of times in cmf forum.

but i'm talking about an unknown, different & more recent procedure, in which a few canadian companies that pay USD dividends have decided to convert those dividends in their own treasury departments, usually using spot rate, prior to sending out the bulk dividend payments to brokers. These self-converted dividends are then sent in CAD. However - just to be really really difficult - "some" dividends get sent to "some" brokers in USD.

the problem for investors in these rogue cases is that it's difficult to know in avance what company X is going to do with broker Y. Take Potash, for example. Potash sends CAD bulk dividends to scotia iTrade & apparently also to roybank. But Potash sends USD bulk dividends to TDDI & BMO Investorline. 

it was yourself & haroldCrump - most notably HC who researched the process extensively - who established back in 2014 that Potash had recently begun delivering CAD dividends to scotia iTrade.

brookfield asset management is another rogue payor of what are basically supposed to be USD dividends. BAM's history is erratic. Sometimes it pays dividends in USD. However for a few years - through 2016 - BAM was paying "some" dividends to "some" brokers - including TDDI - in CAD.

algonquin is a fairly recent convert to USD dividends. There is some slight evidence that algonquin dividends are following the split pattern described above for potash & brookfield. If so, this would be a pity.


.


----------



## AltaRed

Yeah, I do get what you were saying. My solution was to do a best guess on how the dividend was handled, put it into the CAD or USD side as appropriate and wait for one dividend to come to see if there was forex leakage and then journal it to the other side if there was forex leakage. I seem to recall a similar issue with ECA some years back when I held it. 

I don't have any such stocks in my BMO IL account so cannot attest to anything they do, or don't do.


----------



## humble_pie

AltaRed said:


> Yeah, I do get what you were saying. My solution was to do a best guess on how the dividend was handled, put it into the CAD or USD side as appropriate and wait for one dividend to come to see if there was forex leakage and then journal it to the other side if there was forex leakage. I seem to recall a similar issue with ECA some years back when I held it.
> 
> I don't have any such stocks in my BMO IL account so cannot attest to anything they do, or don't do.



^^ is absolutely the only thing to do. Hold new stock in whichever account seems the most reasonable, see what happens, adjust if necessary.

i keep chasing my BAM shares from one currency to the other. Currently they are in USD. My BAM shares have been to the US more often in recent years than i have.

as the regional vp e-mailed when i asked Why this Constant Uproar in BAM dividends, "We have to take whatever they send us."

.


----------



## spdr1812

Couldn't find any news on the drop in AQN today , selling after Div payout maybe ?


----------



## Eder

All utilities under pressure...we only want to buy stoner stocks! (rising interest rates weigh ). Better to buy lower than sell lower.


----------



## spdr1812

Won't be selling my AQN anytime soon , probably add if it dips more tomorrow . Other "utility" stocks in my portfolio didnt drop even close to what AQN has in the last 2 days though , thats why i was wondering ..

And even with the drop in weed stocks today I'm still killing it with them , Weed @ $4 long time ago ..


----------



## TomB19

AQN appears substantially overpriced for what it is. It's a fairly new company and seems to have a small amount of room to grow, so I'm giving it some credit. Still, it doesn't appear to have a ton of headroom for growth so the price seems unjustified.

How much opportunity for growth are we looking at, here? I understand that solar and wind installations will increase over the years but I wonder how long it will be before the current valuation is justified.

Any thoughts? Has anyone else taken a stab at valuing this company?


----------



## Dilbert

I’m enjoying the positive YTD run up. Wonder why this is happening?


----------



## doctrine

All utilities have been flying. AQN has been marketing itself as an ESG play with no fossil fuel exposure. I think it's a little expensive, but then again all utilities are.


----------



## newfoundlander61

I took a position in AQN for my wifes TFSA, purchasing 1300 shares on 28 May 2019 for $15.87. Yes, its been doing pretty good for sure.


----------



## baker3232$

Bought AQN at 10. and again at 12. Bought it for the dividend, stayed for the appreciation.


----------



## newfoundlander61

"Algonquin Power & Utilities Corp. Announces C$900 Million Offering of Common Shares" So what does this news release mean in simple terns for me to understand better, thanks.

Stock Market Quotes | Stock Market Quotes and Symbols


----------



## AltaRed

It means they continue to fund development and acquisition opportunities to grow the company. They have to balance using debt and equity to keep the balance sheet healthy. As long as development provides double digit ROC and acquisitions are accretive, it is an effective use of money. Of course, that is the trust one puts in management....that they spend the money wisely to avoid dilution of existing shareholders. Not the first time AQN has gone to the market and it won't be the last time either.


----------



## newfoundlander61

Thankyou very much for this informative response, good to learn something new from time to time.


----------



## dubmac

If I'm not mistaken, and if I am please correct me, the share price may drop because the value of the company has not increased and the number of shares has increased. dilution of shares.


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## fireseeker

dubmac said:


> If I'm not mistaken, and if I am please correct me, the share price may drop because the value of the company has not increased and the number of shares has increased. dilution of shares.


The value of the company has increased -- it has the cash from the share sale on its books.

Grossly simplified: Company A has 100 shares worth $1 each. It issues 10 new shares at $1. It adds the $10 to its assets, to be used for general corporate purposes. The company now ought to be worth $110 -- still $1 a share.


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## doctrine

That is a monster issue of shares - almost 10% of the company. You would hope that they can invest that money at a rate of return that is better than their current assets, or the overall value of the shares could decrease. The problem with many of these types of companies, is that they can't. They went public or developed excellent assets and get a high multiple. But because they are so slow growth, the only way to grow the company is to issue shares.


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## Eder

When Algonquin Power issues new shares (like it just did), investors should buy


Algonquin’s announcement on Wednesday that it is issuing new shares looks like an upbeat signal for investors




www.theglobeandmail.com


----------



## doctrine

Eder said:


> When Algonquin Power issues new shares (like it just did), investors should buy
> 
> 
> Algonquin’s announcement on Wednesday that it is issuing new shares looks like an upbeat signal for investors
> 
> 
> 
> 
> www.theglobeandmail.com


Yet, did they deploy their shares well from those issuances? Compare annual 2019 results to 2018. 2019 revenue below 2018 revenue. Adjusted net earnings up 3% in total, but down 5% per share because of dilution. And that was before another 10% dilution. You are getting less revenue, net earnings, EBITDA, funds from operation, per share than you were 2 years ago. It doesn't mean it isn't a buy, and the share price can go up for any reason, but it is just a cause for further investigation. I would be concerned a little and my assumption is that AQN's per share metrics and dividend growth will probably be slowing down.


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## AltaRed

While I agree with you using the 2019 vs 2018 result comparisons on a per share basis, it is not entirely fair to compare narrow snapshots. AQN has $9B in the development pipeline to generate even more earnings. The assumption of course is the injection of capital today to fund that program depresses near term per share metrics, but will pay off when the new projects start generating cash/earnings themselves. Only time will tell of course. If they don't deliver, share prices will get hammered in the next 2-4 years if results are not forthcoming. Or they deliver and have an appetite for obtaining yet more capital for further growth, and so on.


----------



## dubmac

fireseeker said:


> The value of the company has increased -- it has the cash from the share sale on its books.
> 
> Grossly simplified: Company A has 100 shares worth $1 each. It issues 10 new shares at $1. It adds the $10 to its assets, to be used for general corporate purposes. The company now ought to be worth $110 -- still $1 a share.


I didn't know that the new share issue had already been purchased. That is significant. Makes sense that the price would not be impacted. scott Barrow (G&M) mentioned that the new issues had been purchased at a price of 17.10


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## londoncalling

I am a long time holder of AQN (first purchased in 2012 ACB under $6). I have tried to add to this position from time to time without success. My most recent attempt was after it raised it's dividend again this year. I have yet to process the implications of such a large issuance of shares. The dialogue that has followed in this thread the past couple days has given me additional insight and forced me to reevaluate my confirmation bias. I still believe AQN is a great company and stock but would agree that execution will determine future share price. I have been burnt a few times with what I believed to be solid companies failing to execute. This is perhaps why I lean towards dividend growth companies so that I can derive income while the price fluctuates. One can easily trap themselves by holding a bad company that continues to pay a dividend it can no longer afford. I have learned a lot about this in my journey of DIY. One must monitor their positions and if one takes the time they can see the warning signs. I plan to hold my position in AQN but now must decide if I want to add and at what price. Thanks to all for sharing the posts above.


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## AltaRed

dubmac said:


> I didn't know that the new share issue had already been purchased. That is significant. Makes sense that the price would not be impacted. scott Barrow (G&M) mentioned that the new issues had been purchased at a price of 17.10


These are done as 'bought' deals by the time they are announced. The underwriters already own the new shares at $17.10 (less a fee), and now they are peddling them to the public. The market may not like this issuance and thus the stock will trade lower. Investors may then be reluctant then to express interest to their broker to buy at $17.10 and then the brokers will have to peddle what they have not been able to sell at $17.10 at market price, taking a loss in the process.


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## AltaRed

Rapid growth companies often come back to the equity markets for capital in order to fund their growth. This is completely normal and good as long as the opportunities are indeed accretive to the company's operations. The problem comes when that growth is no longer as good as the base company and increased share issuance becomes true dilution as noted by Doctrine. 

Many investors, including many CMF members, fell over themselves for years buying into the Crescent Point Energy pacman. That worked as long as the opportunities were, or appeared to be, truly accretive. It went to hell when the company kept overpromising and undelivering and it became apparent this company was a house of cards. It may be in the doghouse forever, even if oil prices bounce back. It will (should) be whipped back in the woodshed if it tries to go to the equity markets again.


----------



## doctrine

The Crescent Point comparison is a good one. CPG was valued because of its high margin oil business. Because it paid out such a high dividend, to grow the company they had to issue shares. They were fairly cavalier about it and bought assets they claimed were valuable. However, the last few years has shown this not to be the case. They have unwound many of those in order to improve the company's profile and are slowly reverting back to what they were in the first place. Except, with a share price that is 90%+ lower.

Altagas is another comparison. They also got hurt by continually growing by acquisition and also new projects, and eventually when execution failed the share price fell. They are still down over 50% from their 2014-2015 highs.

AQN unlikely to drop 90%, and are in a favourable industry especially with their renewable business, which is on trend. You just can't depend on share price appreciation, and you should be hesitant about dividend growth moving forward as that dividend is closing in on $500M a year. You just know this company is going to issue shares every time the share price grows.


----------



## newfoundlander61

I came across this headline this evening in the Toronto Star online paper: 
"Algonquin Power and Utilities buying majority stake in Chilean water utility".


----------



## londoncalling

newfoundlander61 said:


> I came across this headline this evening in the Toronto Star online paper:
> "Algonquin Power and Utilities buying majority stake in Chilean water utility".







__





TMX Money







money.tmx.com


----------



## Eder

Is this a good thing? Miners often get their *** handed to them dealing in 3rd world places.


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## AltaRed

I don't like that kind of acquisition. Please stay closer to home with people that are more likely to have real money to pay their bills. Chilean currency has exposure.


----------



## MrMatt

newfoundlander61 said:


> I came across this headline this evening in the Toronto Star online paper:
> "Algonquin Power and Utilities buying majority stake in Chilean water utility".


I really think that type of infrastructure is a good opportunity, which is why I gladly bought BIP years ago.

That being said, the risk of political interference in basic infrastructure is HUGE. 
For example Doug Ford interfered with Hydro One.


----------



## MrMatt

AltaRed said:


> I don't like that kind of acquisition. Please stay closer to home with people that are more likely to have real money to pay their bills. Chilean currency has exposure.


I'm okay with them paying me in wine, they have some really nice stuff, quite affordable too.


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## Dilbert

I’m not crazy about the acquisition either. But I do have some faith in the management to date. I really enjoy collecting divvy in USD.


----------



## agent99

Dilbert said:


> I’m not crazy about the acquisition either. But I do have some faith in the management to date. I really enjoy collecting divvy in USD.


I have several stocks and ADRs churning out USD. Problem is that it doesn't look like we will need USD any time soon! No Snowbirding for a while it seems. 

Re Chile - it is rated 2nd most stable of all South American countries. 
Hopefully management have done their homework and this investment is not big enough to make or break the company. I own the stock, but haven't checked those numbers.


----------



## Dilbert

Yes 99 you’re right, Covid has 86’d US travel. But I still find having USD useful for buying items and taking advantage of fX when our dollar is tanking.


----------



## agent99

Dilbert said:


> Yes 99 you’re right, Covid has 86’d US travel. But I still find having USD useful for buying items and taking advantage of fX when our dollar is tanking.


I am doing same. I have been working on my old cars. I find I can buy parts in US, and have them shipped in about 3 days by Fedex, cheaper than I can buy them on-line or locally here. And besides, I have those USD sitting there earning nothing!


----------



## londoncalling

Is currently sitting at 52 week low. Have placed an order to top up my existing position.


----------



## KaeJS

I bought some to add to an existing position the other day.

It's about 3% of my port.


----------



## londoncalling

KaeJS said:


> I bought some to add to an existing position the other day.
> 
> It's about 3% of my port.


Same here (3.7%). If my order gets exercised it will become my largest equity holding at just a little shy of 5%


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## londoncalling

Thought I would give this thread a bump. Further discussion on AQN can found here Algonquin Power & Utilities receives big boost to.... AQN is one of my top holdings and I recently added at 17.85. the majority of my ownership goes back to 2011 with a purchase under $6. RBC has recently downgraded the stock based on slowing earning and lower dividend growth. I do not expect the same expansion for this company as was done in the 2010s as it tries to transition into a mature utility. I know the Kentucky acquisition will not be as profitable as previous purchases for the company but I expect it to churn out decent returns with a yield in the 4-5% range and single digit dividend growth. There has been recent hype around renewables which gave AQN and similar stocks a bit of a push which is starting to lose momentum as our current attention is focused on inflation data. Am I missing something? I don't have any plans to add at this time but what else should I be monitoring with this position?


----------



## londoncalling

Thought I would give this thread a bump. Further discussion on AQN can found here Algonquin Power & Utilities receives big boost to.... and Algonquin Power & Utilities Corp (AQN) | Canadian Money Forum . AQN is one of my top holdings and I recently added at 17.85. The majority of my ownership goes back to 2011 with a purchase under $6. RBC has recently downgraded the stock based on slowing earnings and lower dividend growth. I do not expect the same expansion for this company as was done in the 2010s as it tries to transition into a mature utility. I know the Kentucky acquisition will not be as profitable as previous purchases for the company but I expect it to churn out decent returns with a yield in the 4-5% range and single digit dividend growth. There has been recent hype around renewables which gave AQN and similar stocks a bit of a push which is starting to lose momentum as our current attention is focused on inflation data. Am I missing something? I don't have any plans to add at this time but what else should I be monitoring with this position?


----------



## OptsyEagle

I just think a lot of these power utility stocks, especially the renewable's, are on the overvalued side. Brookfield renewable seems to be priced like it is about to break into the cloud computing business or something like that.

It is just an opinion, one that has been wrong for a while, but I have none of them in my portfolio right now. These stocks usually carry a lot of debt and with interest rates possibly on the way up, I suspect that will catch investors attention a lot more then whether the megawatt of electricity they generated came from natural gas or the sun.


----------



## Beaver101

^ Not sure why you're concerned about missing something or the need to monitor this position if 1. this is a long term hold, 2 added more (recently), and 3. your ACBs are less than $10 (guessing here). 

I would only be concerned if the market price drops below my ACB which I think will be a loooong way there, if ever return. Too bad it's in my TFSA given it changed its dividends currency to US$. Who knew.


----------



## londoncalling

Fair point. You are correct in that my ACB is under $10. I would be looking to get out long before it hits my ACB as that would mean over a decade of share price appreciation gone. I journaled AQN over to the US$ a few years ago to avoid currency exchange fees by my broker. Since I hold this in my RRSP taxation is not a factor for me at the present time. To speak to my concern and need to monitor. I have made misteps in the past in falling in love with a stock instead of spotting the warning signs and would prefer to learn from those mistakes. Any position should be monitored and I always appreciate listening to opinions that counter mine. Total return is what matters most. It is impossible to consistently pick the best stock out there everyday but if there is something I am oblivious to that would result in the price going to $10 its better to be forewarned to avoid regret.

As there are two threads going for this stock would it be too much trouble for a mod to merge the threads?


----------



## Dilbert

Beaver101 said:


> ^ Not sure why you're concerned about missing something or the need to monitor this position if 1. this is a long term hold, 2 added more (recently), and 3. your ACBs are less than $10 (guessing here).
> 
> I would only be concerned if the market price drops below my ACB which I think will be a loooong way there, if ever return. Too bad it's in my TFSA given it changed its dividends currency to US$. Who knew.


Hey Beav, you can hold a USD TFSA. I do along with a CAD one and had my AQN journalled over.


----------



## Eder

As people are worrying about AQN going to $10, I'm adding as the near 5% tax advantaged yield is solid and the future demand for its products are assured. I last bought them at $6 but sold long ago around $14....that was a mistake and I'm happy to get back in at a low PE . I intend to never sell my shares as long as the dividend grows and the board does not begin hiring ex TransAlta management.


----------



## Beaver101

Dilbert said:


> Hey Beav, you can hold a USD TFSA. I do along with a CAD one and had my AQN journaled over.


 ... okay, thanks for reminding me. That's the only USA dividends paying stock I got in my TFSA - rest is in C$ so I have been lazy to get it journalled over.


----------



## londoncalling

As we are waiting to start our holidays head to the airport in a few hours I took a moment to look at my portfolio. AS of yesterday both TD and and AQN are tied for my largest equity position at 5.02%. I intend to hold this one for the long run as well. Keeping our emotions in check is important and FOMO is always present. At the moment I am wondering if I should have held back and waited for a dip to get it at a better price. However, I am sure if the stock was currently at $20 I would be posting my regret in not buy at $17. AQN is one of few stocks where I have bought after 200% increase in SP. DIY and stock picking is and endless pursuit in educating ourselves


----------



## doctrine

AQN is likely not going to suffer too much but I would be more comfortable with EMA and FTS. Their payout ratios are lower, and so have a little reinvestment, whereas AQN is wholly dependent on share issues and has integration/acquisition risk, and a lot of share supply. FTS and EMA are now nearly half a decade since their last major acquisition spree and so are a lot less risky as investors become comfortable with the profiles.

Although, EMA and FTS are now hitting 52 week highs, so maybe that ship has sailed in terms of getting them at a good value. Still, I would go other places, unless AQN drops a little more. That dividend is now quite large as a percentage of cash flow/EBITDA and there won't be much growth per share.


----------



## AltaRed

AQN has become a bit of a pacman, aka AltaGas and Crescent Point, with its multiple share issues, and with the acquisition of Kentucky Power akin to the AltaGas acquisition of Washington Gas, which essentially destroyed AltaGas. I don't think AQN's purchase of Kentucky Power is in the same league but it suggests AQN is increasing its appetite.

I think it has enough of a renewable business strategy to turn KP into rate based renewable (not coal) generation but it is a lot to digest and it will take time. The market clearly does not like it much. Remember though that Fortis bought UNS Energy of Tucson Arizona in 2013 that had coal fired generation and that appears to have worked out. 

I will let my AQN shares ride for now as I have done very well so far. Will re-visit in a few years.


----------



## Raggedy Dandy

Big miss on earnings for these guys today, and boy are they being punished for it. Yearly guidance is downgraded, and there's also discussion that the div growth may be paused. This is more excitement than I had hoped for with a utility  



https://ca.finance.yahoo.com/news/algonquin-power-utilities-aqn-lags-132501804.html


----------



## Money172375

Any thoughts on whether this is a good entry point? Stock is down almost 20% today.


----------



## londoncalling

This is not how I wanted to be reminded that the market is open today.  In September this was my second largest holding at almost 4% This will likely result in me underperforming the market in 2022.


----------



## AltaRed

I am disappointed by the lack of timely execution of some of their projects but am otherwise not overly concerned about their ability to bounce back in late 2023, provided they don't go out and acquire more assets. They are facing higher debt servicing costs not unlike Emera and Fortis but clearly the timing of the acquisition of Kentucky Power was not in their favour and maybe will become a defining boat anchor in their near term performance. I never really liked the acquisition from the time they announced it.

I think investors need to start thinking of AQN morphing more towards a regulated utility with single digit returns than a renewable non-regulated power utility with more volatile, growth patterns.

I don't have an issue with a pause in their dividend growth for the next 12 months or so. Too many investors are addicted to unrelenting and unwavering dividend growth and that can be a poor use of funds for growth companies. It is especially so here when the Kentucky Power acquisition has not yet been absorbed and that cash flow/earnings stream is not yet available to AQN.


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## londoncalling

It's a better entry price than yesterday. I think today's descent is an over reaction in the short term. However, the acquisition  _decision to buy assets _in Kentucky, which in my opinion was a bit speculative, has proven to not bring the desired results _ kept the share price down_.

I have owned since 2012. Some incorporate the 3 day rule which will shake out any positions that need to be covered as well as any fear selling. I doubt the stock will jump back to yesterday's price in 3 days but you will get a better indication of its short term direction.

What is the 3-Day Rule in Stock Trading? • Benzinga Answers

edited for clarity


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## cainvest

londoncalling said:


> This is not how I wanted to be reminded that the market is open today.


That was quite the shock this morning. AQN (I don't own any yet) has been lower on my radar than others but now I might just have to take a nibble.

Edit: Wonder if it'll hit high 11's by end of day, might throw in a bid for that.


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## AltaRed

londoncalling said:


> It's a better entry price than yesterday. I think today's descent is an over reaction in the short term. However, the acquisition in Kentucky, which in my opinion was a bit speculative, has proven to not bring the desired results.


The Kentucky Power deal is not yet closed and won't be until early 2023. AQN doesn't have access to its earnings or cash flow yet.


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## londoncalling

I was aware that it hasn't closed. It still requires US fed approval. thanks for pointing out that my post was misleading. I have gone back and edited it to better state my thoughts.

Speculative deals are better received by shareholders when the balance sheet is solid and growing. The company seems to be struggling with its guidance. If they cannot be confident with their plans how can they expect shareholders to remain confident. The companies future now rest with management and their ability to execute going forward. I do think today's drop is overstated and the company will show better results a year from now. 

I am still long AQN.


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## Raggedy Dandy

I've added to my position today. Had a cost basis in the high 13s before this with a 6 year history in it, and am down .50 on ACB with today's purchase. Still only about 3% of my RSP, so I'm content to ride this out for the time being.


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## cliffsecord

I give up...my last few moves have been horrible...yield chasing has not been good for me this year  It's 1.5% of my portfolio so not too big, but no small either. It's 3% of my dividends though. Crossing my fingers that it doesn't cut it's dividend, but it's looking more likely. Holding my nose as I keep holding.

I must keep my resolve to index....


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## londoncalling

The best thing for them to do is leave the dividend alone until confidence in the company and the balance sheet are restored whether it be a year, 18 months or a couple of years. that and don't buy any more assets until the current purchases are fully integrated and returning revenue. Cashflow currently covers the dividend. They should shift their focus on paying down debt,


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## OptsyEagle

Just remember that for companies that need capital regularly, like utilities usually do, the dividend gets cut when investors start to believe the dividend will be cut. In other words, since this is a company, similar to a ponzi scheme, where they take money from new investors, when they issue new capital, and then give some of it to older investors, when they pay a dividend, as soon as the dividend ceases to support the stock, allowing the company to acquire cheaper capital, the company will usually cut the dividend.

I am not calling this company a fraud. Most dividend paying companies act like a ponzi scheme and it works out quite well for everyone. I am just using the term to explain to you that because of this ponzi system of capital acquisition, the dividend will be cut when it ceases to support the stock so as to allow for cheaper capital. In today's interest rate environment that would be probably in the 10% yield area where you could fully say, the dividend is offering little or no more support to the stock price.

Just my opinion of course. I do not own AQN.


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## londoncalling

I took a moment to take a closer look at AQN including a listen to their conference call.

A couple of notes

Good

over 75% of their long term debt is at fixed rate agreements over the next 5 years. The company needs to raise usage rates to create additional cashflow to pay down debt.

Pending sale of renewables facilities to Sunlife (49% of 3 wind facilities in US and 80% of another in SK) while maintaining operations estimated at 334 million in CF.

Expected CF payout ratio forecasted to come down from current 113% to around 105%

Bad

Lower EPS guidance for 2022 from .72 - .77 down to .66 - .69.

Expected dividend payout ratio over 100% while management proposes a target ratio of 80-90%. Long term a payout > 90% is unsustainable. Does this mean they will increase revenue or does it mean their is a dividend cut on the way? Although a cut will do more damage to the share price in the immediate term it may happen in 2023. Looks like the key factor is its ability to integrate the Kentucky acquisition and increase revenue. Those funds must be used to pay down debt, to get its balance sheet in order and provide stronger guidance further out.


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## cainvest

Another tough day, down over 11% so far ...


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## dubmac

yeah, it hasn't done much but drop.
too much debt I think
wouldn't surprise me if they cut the divvie


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## Dilbert

What a mess.…


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## doctrine

Very good analysis, londoncalling. I would say utilities should have payouts closer to 50-60%. People overestimate the 'safety' of these stocks. There are regulatory risks, and they can screw up in multiple ways - hedging interest rates, or currency. Also, they can overpay for new assets. At the multiples these companies go for, it can be a lot of pain.

I owned shares of AQN in 2016 for a year. I came to realize they were not really increasing their net earnings, but they continued to pay higher and higher dividends. I sold at $13.50 in 2017. Probably, some permanent capital destruction has occurred here. Sometimes it makes sense to just sit on your quality assets. Unfortunately, management like AQN want to grow the company regardless of the quality of the assets. There is some underlying value here I am sure, and the equity is certainly not zero, but won't be a premium until likely the management has been turned over to someone more responsible with shareholder equity.


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## londoncalling

Thanks Doc,

Most of the capital gains I made since 2012 have almost been erased in a matter of days. A good reminder that profit on paper is not profit at all. I expect someone in management to take the hit for the overspending the past while. The current CEO has only been in place a couple of years. They do need to sell off some assets but make sure that they are at a reasonable price. There is no reason to take on large debt for poorer assets than you currently hold and then sell off better assets at a reduced price to cover the payments of the new acquisition. A dividend cut is likely inevitable. Many hold this stock for its growing yield over the past decade. However, the company cut its dividend in 2008. This is a strong indication that they have no concern in doing it again. I am not saying that they should keep the dividend at its current rate but my expectation is that will result in a further drop. My guess is a 50% haircut to just under 4% can be expected. I still think the drop over the past two days is an over reaction but not unexpected in the current environment.


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## MrMatt

I don't have a position here. But it seems that they are a bit riskier with their management.

I would have thought (naively and simplistically), that if you have regulated pricing and profits locked in, you'd want to similarly lock in your expenses etc as much as you can, to develop the most boring company you can.

Seems like they were playing financial games.

To be fair, I think a lot of people want companies to play games, rather than simply run a good boring company and spin out profits.


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## OptsyEagle

MrMatt said:


> To be fair, I think a lot of people want companies to play games, rather than simply run a good boring company and spin out profits.


I don't think that is the case. I think the issue is that management like to see the company expand so they can justify higher bonuses and salary. They play a game where heads they win, tails the shareholder loses. I would play that game all day long as well if offered a seat at the table so that is why you see the issues AQN has. They were not the first to play this game and will not be the last but it is certainly not because shareholders prefer it. It is because shareholders have no choice and since they are diversified with other investments, it probably works out not too bad in the end for them either. It is simply another cost of investing that is difficult to avoid.


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## cainvest

londoncalling said:


> I still think the drop over the past two days is an over reaction but not unexpected in the current environment.


Not sure if it's an over reaction but a number of places downgraded the stock today, likely causing a bit more down pressure.


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## MrMatt

What are feelings on waiting for the dividend cut, or just buying something else.
I'm liking the yields on some of these guys, 4-5% with a good payout ratio, some slow growth and conservative management is very appealing to me.


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## cainvest

MrMatt said:


> What are feelings on waiting for the dividend cut, or just buying something else.


Dividend cut is likely though not sure what the % will be when the price settles. Price could easily go sub-$10 if the negative mood continues.

Down almost 30% in just a few days.


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## londoncalling

To expand on what I mean by market overreaction:

Stocks are much more volatile these days. Earnings misses result in larger drops.

This doesn't mean that AQN will see any upwards movement any time soon. Aside from the psychological/emotional impact a 30% decline slowly over 6 months is not much different than a 30% drop over a week if the shareholder doesn't sell. One is definitely more noticeable and creates more discussion. AQN has been a hot topic on this forum and other places as well the past couple of days. Yet for 11 months nobody on CMF even mentioned it.

Looking back to post 141 as an example, I was of the mindset that I would have time to exit before it came down to $10. Now I need to decide if I want to ride this out or sell and move on. Had results been ok on Friday there would have been little discussion taking place. 

Going forward I plan to pay closer attention to management changes. I think most companies did not expect carrying costs to increase the way they did in 2022. This is partly based on wanting them to stay low. Also being told rates will go up at some point for over a decade and it never happening results in people ignoring the caution. Interesting that large corporate boards are not much different than the average person.

Added: Last week many thought a dividend cut was possible whereas most today say it is likely. Aside from share price what else changed?


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## MrMatt

londoncalling said:


> To expand on what I mean by market overreaction:
> 
> Stocks are much more volatile these days. Earnings misses result in larger drops.


I want to take advantage of the emotional market overreactions.
Logically a well managed company/pseudomonopoly in a regulated sector, with regulated profits should be pretty darn stable.

A "surprise" in earnings might be an overreaction, and I'm just wondering if AQN (and others) are actually well managed and it's an overreaction, or not.


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## dubmac

cainvest said:


> I might just have to take a nibble.


I consider this one to be a falling knife, and I am not going to throw more $ at this one. It'll likely hit 8 or so, then, like many underperformers, they'll cut the divvie, and it'll take a few years for the mgmt to figure it all out. One thing I don't do well is finding underperformers like AQN BEFORE they drop in price.


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## londoncalling

I am waiting to hear from management about maintaining the yield. The more they insist that the dividend is sacred and won't be cut the more likely it will happen. That and if they buy more assets before they get their $&!t together would make me sell.

Many companies stumble when they try to expand at a high rate. I am reminded of IPL a couple of years ago with their Heartland venture. I also recall TRP having some challenges a number of years ago with trying to grow at any cost instead of being more selective in its approach. Not all acquisitions are a bad thing for a company. ATD has done a wonderful job over the years. I have been waiting for them to stumble to create a buying opportunity to no avail.


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## cainvest

dubmac said:


> I consider this one to be a falling knife, and I am not going to throw more $ at this one.


Absolutely ... will wait for the price to settle down and for the smoke to clear. Likely have to wait for the next quarter results now and see how the market reacts to that. I normally look at these providing the company has good upside potential which I'm not sure about yet.


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## londoncalling

Saw this posted over at FWF and thought I would share here. Some of the early points are quite obvious but the video does provide a good analysis of future headwinds. For those that don't want to spend the 20 mins it boils down to 2 things


1. The company has a lot of locked in debt coming due in 2023
2. The company has diluted its stock and borrowed continuously

Both of these have not done much to increase EPS and therefore has done little for shareholders. 

This Stock Is Crashing But Has A 9% Dividend - Everything You Need To Know - YouTube


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## hfp75

Well, the reality is that it has been poorly managed, way to much emphasis on paying an aristocrat dividend. They need capital and they just keep borrowing to give it out. Its an eventual recipe for failure & the bell just tolled, markets are frustrated and reacting. I looked at this for a cheapo position... but yes, it looks like a 2023 debt problem, and a dividend that is simply not sustainable for a lower rated BBB company. They need to get serious with their debt, income & dividends - cash flow is a problem now and more next year for them.

When they cut the Div it'll be a 4% div, well for a 4% div why not FTS ? its a better run company, higher credit score.

I'm watching from the side lines. I have no AQN...


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## AltaRed

Closure of the Kentucky Power deal potentially in January will change the metrics quite a bit. That said, the CEO felt compelled to issue a letter to shareholders yesterday to try and calm the waters. Time will tell.


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## Covariance

I don't own it. However, as a result of this discussion I took a look at the financials, and MD&A. The key take away for me was the sensitivity to higher interest rates. In particular, Kentucky will exasperate by drawing down more debt at the then current (high) rate which they acknowledge is expected to be much higher than what they used to justify the acquisition.

My plan is to wait for closure of the acquisition, and then reconsider.


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## newfoundlander61

I may just sell it and move on, it would be good to know if the next dividend payment for Jan 13, 2023 will happen. Will have to start looking at another stock to buy with the money. Currently I hold the following for dividends and some growth in addition to AQN:

TD
RY
BNS
FTS
CPX
ENB
SU
TRP
BCE
T
L
QSR
CHP.UN


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## londoncalling

AltaRed said:


> Closure of the Kentucky Power deal potentially in January will change the metrics quite a bit. That said, the CEO felt compelled to issue a letter to shareholders yesterday to try and calm the waters. Time will tell.



Along with the letter full of warm fuzzies but little clear direction, which is to be expected, while they revisit the plan a director also bought shares on Nov 14 increasing his position considerably.

Algonquin Power & Utilities Corp. (TSE:AQN) Director Buys C$197,667.50 in Stock - MarketBeat

Director Christopher Huskilson acquired 17,000 shares of the company's stock in a transaction dated Monday, November 14th. The shares were bought at an average price of C$11.63 per share, for a total transaction of C$197,667.50. Following the acquisition, the director now directly owns 51,240 shares of the company's stock, valued at approximately C$595,793.10.

Some people don't pay much attention to insider buys and sells. Clearly this director believes in the future of company and the actions of the board. I haven't dug deeper to see if this purchase was just exercising options as part of his compensation. The President and a couple other directors made small purchases this week as well.

added: The marketbeat link(above) indicates a dividend cut but I don't believe that has been confirmed. The dividend is paid in USD so it could be lower due to currency exchange.

Algonquin Power & Utilities Corp. Declares Fourth Quarter 2022 Common Share Dividend of U.S.$0.1808 (C$0.24... (tmx.com)


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## cainvest

newfoundlander61 said:


> I may just sell it and move on, it would be good to know if the next dividend payment for Jan 13, 2023 will happen. Will have to start looking at another stock to buy with the money.


Always an option to sell and if you think the money can be used for better gains somewhere else. Dividend is on Dec 29th so you'll find out before the years end.


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## KaeJS

newfoundlander61 said:


> I may just sell it and move on, it would be good to know if the next dividend payment for Jan 13, 2023 will happen. Will have to start looking at another stock to buy with the money. Currently I hold the following for dividends and some growth in addition to AQN:
> 
> TD
> RY
> BNS
> FTS
> CPX
> ENB
> SU
> TRP
> BCE
> T
> L
> QSR
> CHP.UN


Solid list.

I own every single one.


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## londoncalling

Is This High Yielding (8%) Top Dividend Stock at Risk of a Cut? - YouTube

A comparison to other utility stocks. Not sure if it is an apt comparison as the others are larger companies with a longer history.

Of the list I like FTS the best with its impressive PEG. Another favorite EMA, although in not as bad of shape as AQN, may be headed for some choppy waters.


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## Mortgage u/w

I'm bullish on this stock. Price fell below $10 and I am adding to my current position. I don't expect a quick recovery but regulated utilities such as AQN are usually stable in the long term.


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## londoncalling

Mortgage u/w said:


> I'm bullish on this stock. Price fell below $10 and I am adding to my current position. I don't expect a quick recovery but regulated utilities such as AQN are usually stable in the long term.


I appreciate your bullishness. I am ok with passing on some upside to await the next announcement. I foresee more downside than upside in the short term but would love to be proven wrong. For now classify this is a "show me" stock. I hope you are rewarded for your purchase longer term.


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## cainvest

londoncalling said:


> I am ok with passing on some upside to await the next announcement.


I think this is the case here, see if the next quarter gets any more red flags thrown.


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## newfoundlander61

I will continue to hold my AQN for now, don't need the money so at some point it should come back but it make take a few years.


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## MrMatt

Inside buying is an interesting indicator... which puts me on the fence here.


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## Ricehammer4416

I had a largish position in AQN but sold half in August thankfully. SOLD half of what was left the day after the earnings report at around 12.50.

I have a few hundred shares I'm riding out into the sunset. I've noted the insider buying as well and also note the Kentucky Power deal should close in January. It has me considering picking up a few more shares...


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## Beaver101

newfoundlander61 said:


> I will continue to hold my AQN for now, don't need the money so at some point it should come back but it make take a few years.


 ... same here. Haven't been paying attention on this but if the price is going down then time to paid attention and scoop some more. I would be laughing it goes down to $4 or even $5 which reminds me to allocate them for my RRSP or LIRA ... if I recall, dividends (if still payable) are in US $?


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## Dilbert

All my AQN holdings are in USD accounts and pay in that currency.


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## Beaver101

^ Unfortunately, mine's in a TFSA and is being DRIPped ...l know I know ... NOT very efficient but then I'm lazy ... LOL. Will try to get it corrected on next round by putting it in an RRSP converted to US$ or maybe I should buy them with my US funds ... gotta check what I got there. Yeah, super-lazy too.


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## cainvest

Stock went for a big swing today ... 2M shares traded around lunch time.


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## Dilbert

13M now.


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## MrMatt

Interesting.


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## OptsyEagle

It appears yesterday the US Federal Energy Regulatory Commission (FERC) has denied the Kentucky Power acquisition. Not sure the overall ramifications but if AQN could walk away from the deal I would assume they would run and it would be a positive development for them.

What is kind of weird is why AQN has not issued any news release. Perhaps this is not the final decision and perhaps it means nothing. I don't know. Certainly the Kentucky Power deal is a material transaction for AQN and their investors are certainly speculating on this, with their wallets, as we speak. It wouldn't hurt them to comment on it.

FERC document EC22-26-000 for anyone who wants to read it and beat it to death.


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## AltaRed

I think there is room in the FERC decision to allow the deal to proceed but the primary concern appears to be financing, a legitimate concern of a regulator responsible for oversight of a regulated utility. AQN may be trying to decipher the decision and decide how they might finance differently before coming out with a news release that could say nothing much at this point, other than walking away with a break up fee.


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## newfoundlander61

"It appears yesterday the US Federal Energy Regulatory Commission (FERC) has denied the Kentucky Power acquisition." Most analyst's felt that this wasn't a good move for AQN, so if it is not approved that would help AQN going forward for sure.


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## londoncalling

Yesterday the market agreed the FERC decision was favourable. Today not so much. The market is being fickle.


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## Dilbert

The stock market being fickle? No, never! Lol


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## londoncalling

I am sure AQN management has not decided what it will do in light of this news which is quite understandable. The regulatory roadblock may be a blessing in disguise. However, to not make a statement this week left me baffled. I had no clue as to why the price shot up unexpectedly. My experience with well run companies is that they have statements prepared leading up to milestone events for likely outcomes (one for approved, one for denied, one for conditional). The company likely was provided the information in advance of the media. Hard to say what the long term outcome will be for the stock but I think they should take the charge for the deal not being completed and move on. My faith in management is diminishing.


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## OptsyEagle

You might find that they have a belief that their best hope of maintaining the dividend actually relies on the profits from this Kentucky Power acquisition. The regulators probably also noticed that or at least they noticed the probable price hikes that would ensue to their customers, that would create those extra profits. Hence their reason for deny the transaction.

In any event, it could be a damned if they do or a damned if they don't situation for AQN, so I can understand them wanting to give it a little extra thought. That said, they do have an obligation to investors and this was material news.


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## londoncalling

I agree with your post @OptsyEagle. I believe they are not sure what they want to do going forward. I am just used to a release being made that states they are weighing their options and what those options may be. The decision from the regulators may save the company from itself and give it a chance to get its house in order. I have to remember that previous share price is not an important factor on where the share price goes next. I may exit this position if we get a bounce and head to boring and safer places like EMA or FTS.


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## OptsyEagle

The reality is that the business opportunities for a company whose stock price is very strong will change dramatically when that same stock price gets cut in half. Most likely the management of AQN saw the future for this company being a combination of the Kentucky Power Acquisition, with the organic profit growth built into the increased rates they planned on dumping off on KP's customer base (as all acquiring companies like to do), COMBINED with an eventual share issuance in 2023, to shore up the balance sheet, etc.

Move ahead to today, add 3% or 4% to their outstanding debt costs from unexpected rising rates, a new share price that would cost them more in obligated dividends then they could possibly benefit from with reduced debt loads, AND a US regulator throwing a bucket of cold water on their future profit plans for this Kentucky acquisition. God forbid there is a big whopping fee they will need to pay, just to walk away from the deal, and it would all make for an interesting new planning weekend, for the AQN management, trying to work out these issues, as I write this post. I doubt any of the upper AQN management are out shopping for Xmas gifts for the family today.


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## OptsyEagle

Oh. I remember those meetings quite well. Everyone in the office Saturday morning, by 9:00am. No excuses. If tradition holds true, by about 10:15 to 10:30am, they would just be getting past the "finger pointing blame game" and the "I told you this would happen" part of the meeting. Right about now they are probably calming down and getting to the heart of the problem. Putting all the bad options in front of them and arguing the obvious bad outcomes of each. In a couple of hours from now they will finally get around to choosing the best of all the bad decisions available to them.

It is those types of precious memories that really makes me glad to be retired, each and every day. lol


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## londoncalling

I believe the walk away costs are $65 million for AQN on a revised price of $2.646 billion. This amount is less than the interest costs the company would pay on the financing in our current rate environment. However, they also forego the future revenue of the acquisition.

Thank you for sharing your memory of management meetings. Although I have not been a senior exec at a public traded company your post makes me smile. It's good to know that executive problem solving is done in a similar manner no matter the size of the company.


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## cainvest

So is losing the KP deal (with the current interest rates) better for them financially?


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## dubmac

David Berman, G&M investment reporter, in today's G&M writes "there’s a case to be made here that the share price will recover some lost ground after Algonquin updates its long-term outlook. Expect some clarity at the company’s investor day in early 2023 ...." for what it's worth. Berman is a perma-bear in his outlook. Always sees the glass as 1/2 empty.


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## OptsyEagle

cainvest said:


> So is losing the KP deal (with the current interest rates) better for them financially?


I imagine that is what they are trying to figure out. In my fairly quick analysis they are in a pretty nasty spot, even without KP so perhaps KP was to be their savior, as opposed to their ball and chain. I think the stock market may have started to figure that out by Friday morning as well, as evidenced by the share price pullback that day.

It's a real pickle. It will be interesting to see how it all turns out. My experience was limited to the first meeting. I suspect in a few hours the attendants will have narrowed down the available "bad decisions" to the best 2 or 3, at which time the CEO will announce that they have all done enough. He will thank them for coming in and tell them to enjoy the rest of their weekend. He will advise them to keep close to their cell phones and see them on Monday. That is where I would usually go home.

The CEO, CFO and probably the Head of Legal, or whoever, will then go into the CEOs office at which point the Scotch will come out. The good stuff. All of them would probably already know which decision they are going to go with. This 2nd, more quaint, meeting is really just to figure out how they are going to explain all this to the Board of Directors and who they are going to throw under the bus, as the sacrificial lamb, so as to balance the accountability ledger that our corporate world must maintain at all times. Without that balance we would have to admit that we actually live in a world where even the best planning, financing, and strategic vision can still fail when random future events throws a curve ball at you. This is unacceptable to our corporate world, hence the importance of the 2nd meeting.

A lot of supposition above but even if it does not happen precisely this way, I think it would make a good episode of "Dallas". lol


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## londoncalling

I have participated in several of those meetings over the years just as you have stated where the senior leadership brings in the experts until they feel they have heard enough. Sometimes there is another meeting with a few of the attendees from the meeting that don't get to partake in the 2nd meeting. This meeting is a mix of guessing which option will be taken, why it is the correct or incorrect course of action and ending with one of them stating they are glad they are not the boss and in the hot seat. I have been in all 3 meetings and find it amusing that one of the participants in the third meeting usual becomes the sacrificial lamb and is indeed in the hot seat.


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## londoncalling

The AQN Problem — DividendStrategy.ca 

This link is from November 19th. I believe I read it shortly thereafter but wanted to revisit it before the AQN Investor Day in January.


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## AltaRed

FWIW, I am doing nothing with my AQN. Like Matt said, the various probabilities of the future are baked in. The odds of a dividend cut are very high. The real question is what happens after that occurs? A bounce and recovery? Or no foreseeable recovery in the near future?

Given the significant portion of regulated assets that include a profit component in regulated rates, I'll wager AQN will weather the near term short interest rate problem. Clearly management screwed up by having far too much of their debt short term resulting in them with their knickers at their knees. There is no choice now except to stay the course and NOT panic by extending debt terms willy nilly.


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## londoncalling

@AltaRed, I also intend to hurry up and wait. If I were to sell it would have been right after the horrible report in November. I am curious to see what guidance will be provided in the New Year. Based on that I will re-evaluate the position and either hold or sell. A dividend cut is mostly priced in and would help relieve some of the debt repayment headwinds. In the short term that may lead to another drop in SP. I may be expecting too much but I would like to hear the long term strategy from management. Unlikely that will happen, as for the next while it will be quarter to quarter while they wait for some good news. If they stop providing guidance as some do when SHTF, I will likely sell.


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## cainvest

londoncalling said:


> I am curious to see what guidance will be provided in the New Year.


Banskota, who joined Algonquin in 2020, is set to give a business update before markets open on Jan. 12.


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## dubmac

Berman article on AQN is in today's G&M, though behind a firewall. Not alot of news here. He appears to be optimistic that the share price will improve, but he also acknowledges all of the headwinds.


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