Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Getty Images/iStockphoto

Hi Lou,

Would like to get your thoughts on Noranda Income Fund. Would it be a buy? Dividend rate is decent but is it sustainable?

Look forward to your comments,

Story continues below advertisement

David

Hey David,

Thanks for the assignment.

This will be the second time that I explore the potential for Noranda Income Fund. The last time was March 5, 2014, on a request from John. He wanted my opinion and noted that he wasn't seeing much coverage for the units. The analysis conducted on his behalf identified that the units were trading in a range-bound pattern with resistance at $5.40 and support at $5.10. The units were trading for $5.28 and the MACD and the RSI were turning lower suggesting a retest of support. It was advised to trade NIF.UN in the range until resistance at $5.40 was resolved.

The units continued to move within the range, pulling back near support in early April before catching a lift to its 52-week high of $5.69 in early May. The advance then stalled, taking the units back to near where they were trading in early March. The release of first quarter results in mid-May, which disclosed lower sales and higher costs, added to the selling pressure.

Another audit of the charts will help identify what we might expect from NIF.UN.

The three-year chart depicts the sell signals generated by the RSI and the MACD as the units hit their 52-week high. What is also worth mentioning is that despite the retreat, the uptrend line has not been breached. The units have broken below the 50-day moving average but that seems to be a characteristic of the uptrend that started in January of 2013.

Story continues below advertisement

The six-month chart outlines the support that has formed at $5.20 and resistance that appears at $5.35. The MACD and the RSI are both indicating that we shouldn't expect a trend reversal just yet. What we want to see at this point is support at $5.20 holding. If $5.20 fails to hold we could see a test of the 200-day moving average.

The yield on distributions is currently 9.43 per cent which you described as decent but what has to be viewed as extraordinary in today's extremely low rate environment. The fund has paid its distribution for 29 straight months and there doesn't seem to be any indications that the board is about to curtail the practice.

However, the existing relationship between Glencore Canada and the processing facility in which the fund has an interest is set to expire in 2017, which may reduce the distributable cash available for unit holders at some time in the next three years.

NIF.UN is still a case of trading it within the established up channel.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

Story continues below advertisement

Editor's Note: An earlier online version of this article did not mention the fact that a crucial contract expires in 2017 and may jeopardise distributions. This version has been updated to include that fact.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies