Dear Pat: Your timely responses to my previous questions have been quite beneficial and are greatly appreciated. I would like your opinion of two low-priced stocks with high dividends. The first is Capstone Infrastructure and the second is Eagle Energy Trust. Will either or both be able to maintain their dividend? Thanks for your insight.
Capstone Infrastructure Corp., $3.10, symbol CSE on Toronto (Shares outstanding: 93.7 million; Market cap: $302.2 million; www.capstoneinfrastructure.com), is an electricity producer with 449 megawatts of capacity. It operates gas, wind, hydro, biomass and solar facilities and is developing a total of 79 megawatts of wind projects.
Capstone also invests in utilities, including a 33.3% stake in a municipal-heating business in Sweden and 50% of a regulated water utility in the U.K.
The company plans to keep looking for acquisitions to boost its cash flow. But that adds risk, especially since it has previously added a wide range of operations, including solar and biomass, and made acquisitions in foreign markets like Sweden.
The stock trades at 12.9 times this year’s forecast cash flow of $0.24 a share. It yields a high 9.7%, but Capstone expects to pay out as much as 123% of its cash flow as dividends this year. That means its high dividend could be unsustainable.
We don’t recommend Capstone Infrastructure…
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