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In this year of sesquicentennial, what better way for a Canadian company to boost its dividend-paying abilities than to snap up a U.S. outfit that's been making payouts to its investors since the years before Confederation?

AltaGas Ltd. probably didn't consider the issue quite that way when it agreed to buy WGL Holdings Inc., a Washington gas utility with a dividend streak dating back 166 years. WGL's payout power, however, will make AltaGas one of the top yield names in Canada.

And yet, investors are sending lukewarm feedback about the deal. WGL is trading several dollars below AltaGas' $88 (U.S.) per-share offer, suggesting skepticism the transaction will get done. More importantly for Canadians, AltaGas is well off the highs it reached earlier this year, before the deal was announced at the end of January.

The combination suggests AltaGas investors may profit in the long run – if they can weather what promises to be rocky months, or years, before the WGL deal closes.

Certainly, there is much to worry about. AltaGas paid richly for WGL, as Morningstar analyst Travis Miller's description of the offer as "an incredible value for [WGL] shareholders" suggests. There's significant regulatory risk, as the most recent acquisition of a D.C.-based utility took two years to complete. Because of that timeframe, there are financing and currency issues, because AltaGas needs to borrow more to finance its all-cash offer, and rates could change markedly by mid-2018, when the companies say they'll seal the deal.

In addition, the WGL acquisition will shift AltaGas' business mix, which has historically been one-third power, one-third midstream pipeline business and one-third utilities, says Macquarie Research analyst David Noseworthy. While WGL has a solar business and other unregulated energy ventures, the bulk of its revenue and profit comes from a classic regulated utility.

David Galison of Canaccord Genuity, who has a "hold" rating and target price of $33 (Canadian) on AltaGas, notes that pipeline companies receive much better earnings multiples from investors than utilities do, and the danger is investors might apply a sum-of-the-parts valuation on the new asset mix. "There could be the potential for significant downside to the shares should investors decide to revalue the company based on its targeted business mix post-acquisition," he writes. How much? He says applying standard multiples to AltaGas' future business segments yields a current share price of about $17.88, a good 40 per cent below current levels.

Given the post-deal-announcement dividend yield of 6.7 per cent and management's own payout forecasts, however, that floor seems too low, Mr. Galison writes. And Mr. Noseworthy of Macquarie, who has an "outperform" rating and $36.50 target price, says AltaGas could move back to its historical mix by 2020, given pipeline growth prospects and projects in their non-utility lines of business. "We believe this runs counter to the market's initial intuition on this potential transaction. Where the expectation was that this would once and for all make AltaGas a utility, we say, not so."

Of course, all the aforementioned risks are real, which leads the analysts covering AltaGas to use phrases such as "we'll wait on the sidelines": Just five of the 12 have "buy" ratings, according to Bloomberg, with the rest at "hold." But the more optimistic, such as Robert Catellier of CIBC World Markets, who has an "outperform" rating and a 12- to 18-month target price of $39 on the shares, say "it's worth the wait." This, even as, Mr. Catellier notes, shares of Canadian utilities have a recent history of substantially underperforming the Utilities sub-index between a transaction announcement date and receiving regulatory approval.

"One clear positive for investors is the enhanced clarity of dividend growth," Mr. Catellier says, noting AltaGas management now says it will be able to increase dividends by 8 per cent to 10 per cent a year, even without increasing its payout ratio – the proportion of earnings that get paid out in dividends. If AltaGas can close the deal, "there is appreciable upside to investors seeking dividend growth … Dividend growth visibility had been previously lacking from the AltaGas story, and a successful close will place it among peer group leaders."

Certainly, that "successful close" is a long way away, and a lot has to go right for AltaGas here. But investors who wait for the two companies to hit those multiple deal-finishing milestones will see AltaGas' share price consistently rise. The irony, then: The conservative investor who seeks significant dividend income will best boost returns by taking the kind of big gamble that AltaGas just did, and buying when things seem so uncertain.