A spinoff is a new company broken off from an existing company to create more value for shareholders.
You might be familiar with Kraft Foods Group and Hewlett-Packard, two major brands who have done it with great success.
To create a spinoff, a company sets up one or more of their divisions or subsidiaries as an independent company, then hands out shares in that company to their own shareholders, as a special dividend or spinoff’.
Often, the parent company starts by selling a portion of the new company to the public, to establish a market and a following among investors. That way, by the time of the spin-off, stock in the new company may be liquid enough to be sold relatively easily, or retained with some confidence as a worthwhile investment.
As a general rule, you’d be better off to buy more of any stock you receive as a spinoff, rather than selling. In fact, many studies have shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years.
You can contrast a corporate spin-off with a new stock issue, which is when a company first sells shares to the public.
The two situations are like two sides of a coin—one favourable to investors, the other unfavourable. The motivations of the companies are nearly the opposite.
To determine which stocks are best to invest in, use our three-part Successful Investor philosophy:
Discover how to build a winning stock market portfolio in this free special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada, from TSI Network
GXO LOGISTICS INC., $57.85, symbol GXO on New York, is one of the world’s largest contract logistics providers.
GXO aims to provide high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics (see below), and other supply chain services. GXO’s revenue is diversified across numerous markets and… Read More
CANADIAN SOLAR INC., $26.25, symbol CSIQ on Nasdaq, is one of the world’s largest manufacturers of solar photovoltaic modules and solar energy and battery storage solutions. Founded in 2001, it went public in 2006, selling shares at $15 each.
On August 17, 2023, the Ontario-based company… Read More
In January 2022, H&R REIT spun off most of its retail properties to Primaris REIT. Unitholders received one unit of Primaris for every four units of the original REIT they held. At that time, the parent REIT investors held 74% of Primaris, while the Healthcare… Read More
ROYAL BANK OF CANADA, $122.85, Toronto symbol RY, is a buy.
Canada’s largest bank by market capitalization raised your quarterly dividend by 2.3% with the August 2023 payment. Investors now receive $1.35 a share instead of $1.32. The new annual rate of $5.40 yields a solid 4.4%.
The… Read More
Use these ratios, our tips on spinoffs, and other advice for long-term gains with top undervalued Canadian stocks. Learn more now
Undervalued stocks are companies that typically have strong fundamentals and are trading, for one reason or another, at a low share price.
When you’re looking for… Read More
Value seekers target stock spinoff investments because they recognize the potential long-term gain
Seekers of undervalued stocks are most likely to read the voluminous material that companies hand out as part of the stock spinoff process. They’re also most likely to buy a stock spinoff… Read More
TOTAL HELIUM LTD., $0.43, symbol TOH on the TSX Venture Exchange, aims to become a significant producer of helium. Its focus is now on a recently acquired interest in the Pinta South helium field in Arizona.
In March 2023, Total Helium announced that it had entered… Read More
CAE INC., $31.66, Toronto symbol CAE, remains a buy for long-term gains.
The company is a leading maker of flight simulators for commercial and military aircraft. It also operates pilot-training schools in over 40 countries and makes mannequins and other medical-simulators for training health professionals.
CAE continues to… Read More
TC ENERGY INC., $48.19, Toronto symbol TRP, remains a buy.
TC generates steady cash flow for investors mainly through a 93,700-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. Its other operations include 4,900 kilometres of crude oil pipelines and… Read More
CHOICE PROPERTIES REAL ESTATE INVESTMENT TRUST, $13.81, is a top pick for 2023.
Choice is Canada’s biggest REIT, with 702 retail, industrial and residential properties totalling 63.8 million square feet of gross leasable area. Its occupancy rate is a high 97.4%. George Weston Ltd. (Toronto symbol WN)… Read More
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