Google Partner … 18% Yield? Roger Conrad

“This Google Partner is just one of the 18%+ high-yield trusts you can snap up now.”

This ad comes in from Roger Conrad for his Canadian Edge newsletter, one of several from the great KCI marketing machine that, like almost every other major financial newsletter publisher, is headquartered a stone’s throw from the stunningly opulent and energy efficient Stock Gumshoe central office.

I have yet to run into Roger Conrad at any of our 1,100 Starbucks locations, but if I do I’m sure he’ll talk my ear off about the great opportunity available in Canadian Income Trusts (also called Royalty Trusts and Business Trusts). And this is a teaser for another one of those.

His newsletter will run you about $400 a year … the answer to this teaser? Priceless. Just read on!

“… nothing prepared us for the surge in returns that these trusts are showering on our readers now. And at the pace these trusts are moving, we should see returns up 100%, exactly double, on our favorite picks before the year is out.

“And these cash-rich trusts are still a bargain. Share prices, mostly beaten down last year, are still below our buy targets, so you’ve got a great entry point. And with yields up to 22%, there’s just no way you can miss.”

That’s how Conrad starts us off … then he gets into some of the specifics of this particular trust that he thinks we should buy. And, if my email load is an indication, this one is the pick that really caught the attention of my readers …

“This Google Partner Pays You 17.6% (Google Pays You Zip)

“How can two turbo-charged companies in the same web business have such a different way of rewarding investors (or not?)

“Like Google, this trust is a runaway, internet-based success. Unlike Google, this company pays you a monster-sized yield of 17.6%!

“This trust is Canada’s undisputed leader in online media with over 20 web mega-sites and 200 ‘publications’. Its four top brands help consumers find everything from jobs to homes to apartments to cars — to the best shopping bargains around.

“And they’ve just inked a spanking new deal that’s sure to please both consumers and small businesses alike — and send their ad revenues through the roof — yet again.

“Many boutiques, restaurants, clinics, hairdressers, retailers, service outfits — you name it — do not have a website … with this new trust venture, any small business can convert its print sales material into a search-optimized web presence!”

Some specifics, perhaps?

“Their internet revenue alone surged a whopping 38.4% in the third quarter, not counting their expansions!”

Conrad thinks you’ll see a 20% dividend in 2009, and that the shares will double in less than nine months. So what is it?

Feed all that into the ‘ol Thinkolator, which is admittedly a bit squeaky after our latest cold snap, and after warming up for a few minutes we discover that this is …

Yellow Pages Income Fund (YLO-UN in Toronto, YLWPF on the pink sheets.)

Unlike some pink sheets shares there is at least some volume, so the prices ought to be a pretty close match to the Toronto shares, just make sure to check the current currency exchange rate before jumping in if you go that route (yesterday the units closed in Toronto at C$6.46, and closed on the pink sheets at $5.17 — that’s within a penny as of the last exchange rate check I made).

What do we know about these folks? The Trust is basically made up of the Yellow Pages Group, which publishes online and print directories and makes its money from local advertising; and Trader, which publishes “vertical media” stuff — publications that advertise local bargains, auto sales, real estate etc. (the kinds of things you’ll see distributed free in any US city, I assume it’s the same in Canada — Auto Trader, Penny Saver, New Homes Guide, etc.).

And they do also have an online presence, and they are a Google partner — they are a reseller of AdWords for Google in Canada, and help customers optimize online ad campaigns and develop online advertising strategies, and they also publish their directories and Trader publications online. Their online revenue did grow 38.4% in the last quarter, but it’s also important to note that the print publications still provide the lion’s share of their money — online revenues were only about 15% of total revenue last quarter. Saying that they’re in the “same web business” is perhaps a bit of a stretch, though it’s technically true that both of them are, to some degree, online advertising companies.

So … does that sound familiar? That’s a very similar business to the big US yellow pages publishers, R.H Donnelly and Idearc — and neither one has exactly been a fabulous investment in recent years, so the problems that those companies ran into might be signposts to use in your search for any skeletons in the closets at YLO.

Both Idearc and R.H. Donnelly were spun off from their former parents (Verizon and Dun and Bradstreet, respectively) with massive debt loads that they were expected to be able to handle thanks to their high margin, predictable business performance (dry cleaners and restaurants don’t usually cancel their yellow pages ads). Though they were touted by bottom-fishers all the way down, the business wasn’t strong enough to handle that leverage last year — both fell more than 99% in 2008, and both are now delisted from the major exchanges and trade on the pink sheets at pennies a share.

Yellow Pages appears to be in far better shape than that, at least so far — they do carry a lot of debt, but they also reported good earnings last year … we’ll see if the problems that seem inevitable for the Canadian economy drag down the business, but the yield at the current rate is just about 18%. The trust’s investor relations page is available here if you’d like to dig in and start your own research.

So … it’s not exactly Google, but maybe that’s a good thing. What do you think?

full disclosure: I own shares of Google. I do not currently own any other stock mentioned above, and will not trade in any shares mentioned for at least three days.

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

Related Articles:

More High Income Trusts from Roger Conrad

“Up To 16% Yields … From Steady, Cash-Rich Companies” — Roger Conrad

“The Olympic Builder that Doubled Its Dividends”

“Multiply Your Money by Solving China’s Water Problem”

Supercharge Your Wealth and Pay (Nearly) No Taxes!

1. This is KCI again. To answer some questions related to my comment here a few days ago: Neil George left KCI and “Personal Finance,” pardon my memory, in the time frame of just before Thanksgiving ‘08 to mid-Dec. A statement in “PF” in early/mid-Dec just called it a “sudden retirement.” Elliot Gue picked up the baton for “PF.”

   More relevant to today’s article, “Yellow Pages” seems to be a favorite at KCI but I am personally nervous about it. I think the electronic revolution will hurt it badly over time. I have been watching electronics replace paper for much too long.

   [Reply]

   

   eldenfrente Reply:
   January 16th, 2009 at 3:19 pm

   Yellow Pages (YLWPF), which was first touted some years ago and at much higher prices by the unlamented Neil G. and the KCI marketing machine, is a victim of its old-fashioned name. They’re heavy into electronic directories and advertising. It’s not just printed directories.

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   StockGumshoe Reply:
   January 16th, 2009 at 3:46 pm

   Quite true — but Donnelly and Idearc are into online directories, too, that business has not grown fast enough (for them) to make up for declines in the core directory business. The directories still make up 85% or so of YLO sales, though I haven’t looked to see if that means just print directories (many of those ads are probably bundled print/online, and my suspicion — again, I haven’t researched this — is that the traditional yellow page ad is still the leading revenue generator by far).

   Doesn’t mean they’re not worth an investment, that’s your call — just that the online stuff is still largely, they hope, in the future. Not too different from newspapers, the paper still delivers the high margin profits, but they hope the website grows fast enough to take the place of dwindling future print revenues.

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   eldenfrente Reply:
   January 17th, 2009 at 12:52 pm

   Well put, sir. Fully agree and the jury remains out on this one. The paper vs. online ads paradigm is shifting faster and in more directions than a swarm of angry hornets. What’s amazing (and not shifting much) is how the KCI crew keeps recycling “ideas.”

   Posted by Dusty | January 16, 2009, 10:46 am

2. From a technical analysis standpoint, YLO looks good: a couple weeks ago it broke its downtrend line on strong volume and executed a perfect backtest before resuming its climb. A stop-loss just under $6.03 would make sense.

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   Posted by TimothyJ | January 16, 2009, 10:52 am

3. I receive Elliot Gue’s free energy newsletter, and I find it very well assembled. It summarizes together much of the same info I get of of theOilDrum.com, minus the wacko stuff that goes on any blog site. I’ve considered subscribing to his $400 energy newsletter, but am a little fuzzy about what it provides that I don’t already know.

   Any thoughts out there on Gue & his subscription? KCI subscriptions in general?

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   Julie Wallsh Reply:
   January 18th, 2009 at 7:43 pm

   I am a subscriber — and a big fan of Eliot Gue and his comrade Roger Conrad. Have many good calls from them from last 8 years. Tho the sudden absence of Neil George was handled poorly, there was an apology and after the first few new issues I am still a believer.
   Be prepared for lengthy — one of the last was 26 pages long — explanations/recommendations — these guys are going to make sure you understand it ALL. OIl rigs, Pipe lines, shipping, MLPs that are energy related: I think you can probably sign up for an introductory trial. yep here is the link: https://www.kcisecure.com/order-old/e_neworder/form_full.asp?rl=no&pub=tes&term=24&promocode=W90407
   Nope they aren’t paying me to say this — and there is another fellow who uses same bank as I — and he’s a big big fan also.

   [Reply]

   

   Dave Reply:
   January 21st, 2009 at 2:53 pm

   Gue and Conrad are pretty good. I have followed both. Their newsletter are expensive, but they write columns in Personal Finance and in the financial press. I stopped taking PF in the last year, but still get to read some of Elliot Gue and Roger Conrad’s stuff.

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   Dave Reply:
   January 21st, 2009 at 3:00 pm

   Oh, BTW, Conrad is probably the expert on Canadian trusts.

   [Reply]

   Posted by csprings | January 16, 2009, 11:14 am

4. Is this the same Roger Conrad that publishes “Utility Forecaster”?

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   StockGumshoe Reply:
   January 16th, 2009 at 11:57 am

   Yep — well, he edits both, the publisher is KCI Communications, which also published letters from Elliot Gue, Yiannis Mostrous, etc.

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   Posted by Brad | January 16, 2009, 11:29 am

5. I own YLO mainly for it’s high monthly dividend payments. I bought this one to help diversify me from the many oil and gas income trusts I own. YLO had been trading as high as $14. last year and it trades in high volumes in Canada each day often over a million. Another great dividend play in Canada is Jazz Air, JAZ.UN, which is an offshoot of Air Canada and services smaller communities across the country, it yield over 20%.

   [Reply]

   

   Barry Swartzberg Reply:
   January 16th, 2009 at 2:57 pm

   Hi Stocklord,

   You seem to be a pretty astute income investor. You have indicated you own a number of oil and gas income trusts, which I have not yet dabbled in and I’m interested in some feedback about which ones you have confidence in.

   Thanks.

   Barry

   [Reply]

   Posted by Stocklord | January 16, 2009, 12:38 pm

6. I advertise in the yellow pages… so perhaps I have a bit of an inside track. They own canada411.com and yes, they list you on that site when you buy an ad. I am listed as a quarter column 1 colour under one heading and just a listing under two other headings. I paid $2600 (calgary alberta prices) for the honour and they put me in their online search engine as well.

   Yes trader publications are free inmost us cities. Up here they go for between 3 and 5 dollars depending on which you buy. They are free online to search. Listing the car or truck is what costs. They also own the bargain finder publications (also on line). I don’t own the stock but will likely research it. I don’t know how their future looks- I will not be listing in the yellow pages again this year… I suspect there will be other “drop outs” or reduced ad sizes.

   [Reply]

   Posted by danny m | January 17, 2009, 9:36 am

7. With any luck they won’t cut their distribution, but if the market moves lower it’s very likely that the stock will trade lower than it’s distribution yield. I like some canadian trusts, however I won’t start buying those until the market proves it’s in recovery.

   [Reply]

   Posted by Simon | January 17, 2009, 6:21 pm

8. If long yields were to spike,surely these things could hit serious trouble.

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   Posted by Daniel Victor | January 26, 2009, 1:17 pm

9. Hey Gunshoe, what’s this tiny obesity stock touted by Fannon of Phase One Investor, a high-priced letter from Stansberry & Associates.

   [paste-in follows]

   February 06, 2009

   The Biggest New Drug in Medical History
   By Rob Fannon, editor, Phase 1 Investor

   The promise of a “marijuana munchies” drug is officially dead…

   French drugmaker Sanofi-Aventis believed it’d struck gold with its drug Acomplia. Acomplia curbed appetite by targeting the “cannaboid” receptors in the brain – the same signals that give marijuana smokers the munchies.

   According to Sanofi, the drug helped patients shed pounds, quit smoking, lower cholesterol, and treat diabetes. Wall Street hailed it as the next wonder drug. Analysts predicted annual sales in excess of $5 billion, calling it the “blockbuster of blockbusters.” One tiny problem – safety.

   ———- Advertisement ———-
   On March 30th, FDA results could make you $195,600

   We’ve waited 2 years for this day.

   On March 30th, there’ll be an announcement of FDA results for a new drug that could create the single biggest return of any investment we’ve ever found, in 10 years.

   Click here for the full details.
   ————————————

   The obesity market is one of the last great untapped markets for biotech. This is just the latest chapter in the drug industry’s struggle to develop an effective weight-loss drug.

   According to the Centers for Disease Control, two-thirds of Americans are overweight and 33% are “obese.” Obesity kills 300,000 people in the U.S. every year. High blood pressure, coronary heart disease, stroke, diabetes, and arthritis – these medical nightmares can be traced to the added stress of carrying too many pounds around the waistline.

   If one industry stands to gain from the “Swelling of America,” it’s the drug sector. At any one time, 70 million Americans are trying to lose weight and spending tens of billions of dollars in the process. Already, we spend $50 billion a year for over-the-counter weight-related treatments. Conservative estimates put the obesity-related prescription-drug market at $10 billion per year.

   For decades, drugmakers like Sanofi have been trying to tap into that market. And right now, three biotech companies are deadlocked in a race to develop the industry’s first obesity blockbuster.

   The smallest of the three companies, $200 million market cap Orexigen (OREX), is wrapping up Phase III trials for its drug Contrave. San Diego-based biotech Arena Pharmaceuticals (ARNA) is working on Lorcaserin. And Vivus (VVUS) is racing to release data on its diet drug Qnexa.

   The Flip Side of Drug Disasters

   A Slow Death for the ‘Blockbuster of Blockbusters’

   With a market so big and completely untapped, there’s plenty of room for all three drugs. But each company is aiming for the first-to-market advantage. The biggest winner could pull in as much as $5 billion or $10 billion a year.

   [Reply]

   Posted by achten_s | February 6, 2009, 5:53 pm

10. Since I did not see any mention of the 2011 tax starting on all these trusts I take it that people think that it is so well known that it is priced in. Alantic Power is the only one that I know of that will not be taxed, if there are others I would welcome comments.

    As far as dividends go has anyone looked at AGNC or that family, HTS is another. I will confess I do not understand nor could figure out their business. It has something to do with mortgages and rate differentials including the LIBOR rate, that is about the extent of my knowledge. However, the proof is in the pudding, in this downturn that family barely suffered and is paying upwards of 20% returns. AGNC just set a knew high on their declared $1.50 quarterly. They obviously cannot keep this up but even half that would be attractive.

    [Reply]

    

    spreadtrader Reply:
    June 26th, 2009 at 10:57 am

    Why can’t they keep it up?

    This is what they do:

    American Capital Agency Corp. (Nasdaq: AGNC) is a mortgage REIT that invests exclusively in agency securities for which the principal and interest payments are guaranteed by a U.S. Government agency (such as the Government National Mortgage Association, or GNMA), or a U.S. Government-sponsored entity (such as the Federal National Mortgage Association, or FNMA, and the Federal Home Loan Mortgage Corporation, or FHLMC).

    They have no employees and they invest in GUARANTEED paper. What’s not to like? Except the present stock price…….

    [Reply]

    

    StockGumshoe Reply:
    June 26th, 2009 at 11:06 am

    They key with all those guys (Annaly is the granddaddy of the business, but there are a half dozen of them now) is managing the direction and spread of interest rates — they can always screw up, but there is a certain amount of stability there if they’re well managed.

    Atlantic Power is not a royalty trust, it behaves similarly and trades in Toronto, but it’s one of those “enhanced income” funds, each unit is roughly half stock/half high-yield bond and pays both a dividend and interest income. These were hot a few years back and there are still a half-dozen or so around, including ATP.

    [Reply]

    

    bruce u. Reply:
    June 26th, 2009 at 12:45 pm

    thanks on both comments. i am long AGNC but since they have broken out well above their normal 2-3 year highs i am cautious on buying more. on the canadians, could i trouble you for the names/symbols of some others like alantic. or give me a link to start on the net. I like them for two reasons: 1. no big unknown as to what is going to happen come jan 2011. 2. since the payment is part interest it is not subject to the 15% getting it across the border tax like a normal canadian stock/trust div. (as an aside i think that the tax rebate we get on the 15% could go away with a stroke of the congressional pen in this Robin Hood govt we have now.)

    [Reply]

    

    bruce u. Reply:
    June 29th, 2009 at 11:37 am

    there is a great seeking alpha article on aMREITS. still trying to find canadian companies like atlantic power ( in the same class not necessarly industry)

    Posted by bruce u. | June 26, 2009, 10:32 am

11. Re: Utility Forecaster
    I’m a 10 year subscriber, and I like those reco’s most of the time. I’ve made $ on even Enron, but only by using my intuition, i.e., when to bail out (90% profit). Overall, a good risk adjusted letter, worth the $. There is a lot of information there, but I worry that he is getting spread too thin with his other endeavors.

    [Reply]

    Posted by Pete Borgerding | June 26, 2009, 11:30 am

12. Some others to take a look at:
    cmo,anh.
    If my understanding is correct these are both fairly safe and very similar to nly.

    [Reply]

    Posted by Lee | June 27, 2009, 11:58 am

13. On conrad. I use to subscribe to the canadian edge letter. I purchased his recommendations all at prices he recommended. Then waited for the sell signals (figuring the purpose of the letter is not only to get the buy signals but because he is suppose to be the expert on canadian trusts). All 10 positions dropped for a major loss. In the meantime I was reading other comments about getting out of trusts. When I wrote canadian edge we got the typical circle jerk answers. Not only did I cancel but other people I know did the same. you can do just as well on your own and it won’t cost you anything. Plus because you picked the position you will have a better feel on when to get out.

    [Reply]

    Posted by michael lane | August 28, 2009, 10:36 am