Alaris Royalty Corp. (TSX:AD) is a Canadian royalty company engaged in providing much-needed capital to companies which may have difficulty raising money, in exchange for a share of future profits in perpetuity.
The royalty business is one which is typically connected to higher-risk speculative industries such as commodity exploration and development companies, and are thus more highly correlated with movements in the market over time. Long-term investors often consider royalty companies as part of a well-balanced portfolio due to yields which are typically above-average, reflecting additional near-term volatility but often remaining robust over a long period of time.
Alaris’ share price has dipped more than 20% over the past 12 months, boosting the royalty company’s dividend yield, a yield which now sits above 7%.
Digging through an assortment of companies yielding more than 7% can often prove to be a dangerous exercise, as excess yield is often symptomatic of other larger issues within the underlying operating business, and may indicate that investors believe a dividend cut may be on the horizon. In that regard, investors worried about a market downturn or those more risk averse than normal may want to consider other high-yielding securities at this time.
My take on Alaris is that right now may simply not be the right time for a long-term investor to initiate a position in this company, due to headwinds which have the potential to continue to depress the company’s share price.
Invest wisely, my friends.
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