On Thursday, the U.S. stock markets were closed while Toronto was about unchanged.
There were no particularly note worthy moves in the Canadian stocks on our list.
Boston Pizza is down to $15.53 yielding 8.9%. Rising interest rates would not seem to explain very much of the decline. After all, the rate on a 10 year Canadian government bond is still only 2.35%. Presumably, the market fears a distribution cut here due to recent declines in same store sales.
Today, Statistics Canada released data on sales at Food Services and drinking places for September. For the full service restaurant category the gain in Canada for September versus the prior year was 5.4%. Ontario was 6.1% and Alberta was 2.1%.
Boston Pizza had reported same-store sales down 0.2% for Q3 and down 0.4% year to date. It certainly appears that they are under performing the market somewhat. In order to maintain and not cut the distribution they don’t need much same-store growth. But they need some. The trailing year payout ratio is 103.4%. They need some growth (or a distribution cut) to get that down to or under 100.0%. They have a modest amount of cash that allows them to run at over 100% temporarily. But unless they see (or forecast) same store growth resuming then they eventually have to cut. The latest added gloom in Alberta will not help matters. I can’t say how likely a cut is. Any cut should be quite modest. And I think they will try hard to avoid a cut.
I will soon update BP for its Q3 results and will include taking a look at its debt and whether rising interest rates might contribute to the risk of a distribution cut. Its interest rate is locked in for 2019 but after that will presumably rise. In the past the fund has borrowed money to repurchase shares. The economics are good on that at the current unit price but it might be considered too risky.
The numbers of people collecting Employment Insurance benefits declined in September across the Country. In part due to an improved economy. But especially in Alberta it was partly due to expiry of special extended benefits.
The low oil prices are of course the big topic of conversation in Alberta. But rail is ramping up rapidly. There are several proposals to ship bitumen in solid form which could use coal cars. The solid bitumen could then be shipped to Asia in container ships or bulk carriers. The huge price spreads create a huge arbitrage opportunity and there are people looking to take advantage. Justin Trudeau bravely came to Calgary to speak but basically had absolutely nothing new to say about how to get oil moving.