The Globe and Mail reports in its Friday, Nov. 25, edition that Canaccord Genuity analyst Matthew Lee sees greater upside at Diversified Royalty following the acquisition of its seventh royalty stream.
The Globe's Darcy Keith writes that Diversified acquires royalties from a variety of businesses, including oil change provider Mr. Lube.
Its latest streaming acquisition is with SBS Franchising LLC, known as Stratus, which is a North Hollywood, Calif., franchisor involved in commercial cleaning and building maintenance services in the U.S. and Canada.
Mr. Lee says, "We believe the trademark acquisition, which is the first in the U.S., will be immediately accretive to Diversified, adding $8-million in annual royalty income."
In tandem with the transaction, Diversified raised its dividend modestly from 23.5 cents per share to 24 cents per share. That equates to an 8.2-per-cent annual dividend yield.
Mr. Lee boosted his share target by 50 cents to $4. His price target is 14 times his fiscal 2024 earnings before interest, taxes, depreciation and amortization estimates. Mr. Lee says, "Our valuation, which is a slight premium to royalty peers, is largely justified by the firm's diverse portfolio."
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