Diversified Royalty Corp. (DIV.TO) | Investment Case

1. Company Snapshot

1.a. Company Description

Diversified Royalty Corp., a multi-royalty corporation, engages in the acquisition of royalties from multi-location businesses and franchisors in North America.The company owns the Mr. Lube, AIR MILES, Sutton, Mr. Mikes, Nurse Next Door, and Oxford Learning Centres trademarks.The company was formerly known as BENEV Capital Inc.

and changed its name to Diversified Royalty Corp.in September 2014.Diversified Royalty Corp.

was incorporated in 1992 and is headquartered in Vancouver, Canada.

Show Full description

1.b. Last Insights on DIV

Diversified Royalty Corp.'s recent stock performance was negatively impacted by the company's undervaluation, as suggested by an intrinsic calculation that estimates its fair value at CA$5.31, indicating a 47% undervaluation. Additionally, the company's lack of significant growth prospects and high dividend payout ratio may be contributing to its underperformance. Furthermore, the recent dividend announcements, while positive for shareholders, do not address the underlying undervaluation issues.

1.c. Company Highlights

Last Price	3.75
Change Percentage	0.54%
Open	3.73
Previous Close	3.73
Market Cap ( Millions)	629
Volume	140811
Year High	3.82
Year Low	2.5
M A 50	3.58
M A 200	3.22

FCF Yield	-0.85%
Dividend Yield	6.94%
ROE	9.68%
Debt / Equity	101.70%
Net Debt / EBIDTA	517.64%
Price To Book	2.19
Price Earnings Ratio	22.66
Price To FCF	-117.34
Price To sales	9.44
EV / EBITDA	16.41

2. Transcript Summary

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3. NewsRoom

Diversified Royalty (TSE:DIV) Has Announced A Dividend Of CA$0.0229

Nov -07

Source:

Diversified Royalty Corp. Announces November 2025 Cash Dividend and Q3 2025 Earnings Release Date

Nov -03

Source:

Diversified Royalty Corp. Announces October 2025 Cash Dividend

Oct -02

Source:

Diversified Royalty Corp. Announces September 2025 Cash Dividend

Sep -03

Source:

Is There An Opportunity With Diversified Royalty Corp.'s (TSE:DIV) 44% Undervaluation?

Aug -30

Source:

Diversified Royalty Price Target Raised to $3.50 at CIBC

Aug -07

Source:

Diversified Royalty Corp. Announces Second Quarter 2025 Results and Strongest Adjusted Revenue(1) Quarter in its History

Aug -06

Source:

Diversified Royalty Corp. Announces August 2025 Cash Dividend and Q2 2025 Earnings Release Date

Aug -05

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.04%)

6. Segments

Royalty

Expected Growth: 8%

Diversified Royalty Corp's 8% royalty growth is driven by increasing brand recognition, expansion into new markets, and strategic partnerships. Additionally, the company's diversified portfolio of brands across various industries, such as food, retail, and entertainment, contributes to its steady growth. Furthermore, the company's ability to acquire and integrate new brands efficiently also supports its growth momentum.

Management Fees

Expected Growth: 10%

Diversified Royalty Corp's 10% growth in Management Fees is driven by increasing brand portfolio, strategic acquisitions, and expansion into new markets. Additionally, the company's focus on royalty generating assets, cost savings initiatives, and effective capital allocation contribute to the growth. Furthermore, the company's ability to negotiate favorable royalty rates and contracts also supports the growth momentum.

7. Detailed Products

Mr. Lube

A quick lube service that provides oil changes and other vehicle maintenance services

Oxford Learning

A supplemental education center that provides tutoring and educational programs for children

Sylvan Learning

A supplemental education center that provides tutoring and educational programs for children

Stratus Building Solutions

A commercial cleaning and janitorial services company

Mr. Rooter

A plumbing and drain cleaning service company

8. Diversified Royalty Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Diversified Royalty Corp. operates in a niche market with limited substitutes, but there are some alternatives available to customers.

Bargaining Power Of Customers

Customers of Diversified Royalty Corp. have limited bargaining power due to the company's diversified portfolio of brands and limited dependence on individual customers.

Bargaining Power Of Suppliers

Suppliers of Diversified Royalty Corp. have moderate bargaining power due to the company's dependence on a few key suppliers, but the company's diversified portfolio mitigates this risk.

Threat Of New Entrants

The threat of new entrants is low for Diversified Royalty Corp. due to the high barriers to entry in the royalty business, including the need for significant capital and expertise.

Intensity Of Rivalry

The intensity of rivalry in the royalty business is moderate, with a few established players competing for market share, but Diversified Royalty Corp.'s diversified portfolio helps to mitigate this risk.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	56.19%
Debt Cost	6.79%
Equity Weight	43.81%
Equity Cost	11.88%
WACC	9.02%
Leverage	128.24%

11. Quality Control: Diversified Royalty Corp. passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Diversified Royalty

A-Score: 7.4/10

Value: 4.6

Growth: 5.8

Quality: 6.3

Yield: 10.0

Momentum: 7.5

Volatility: 10.0

1-Year Total Return ->

Steel Partners

A-Score: 6.1/10

Value: 9.3

Growth: 8.8

Quality: 7.2

Yield: 0.0

Momentum: 6.0

Volatility: 5.3

1-Year Total Return ->

RCM Technologies

A-Score: 5.5/10

Value: 5.1

Growth: 8.4

Quality: 5.3

Yield: 0.0

Momentum: 9.0

Volatility: 5.0

1-Year Total Return ->

Tejon Ranch

A-Score: 4.5/10

Value: 7.8

Growth: 2.9

Quality: 3.6

Yield: 0.0

Momentum: 4.0

Volatility: 8.7

1-Year Total Return ->

Compass Diversified

A-Score: 4.4/10

Value: 7.4

Growth: 2.3

Quality: 4.5

Yield: 10.0

Momentum: 0.0

Volatility: 2.0

1-Year Total Return ->

FTAI Infrastructure

A-Score: 3.5/10

Value: 7.2

Growth: 4.2

Quality: 2.4

Yield: 4.0

Momentum: 1.0

Volatility: 2.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

14.34%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.02%

Diversified Royalty Corp. - CA2553311002

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on DIV

1.c. Company Highlights

Higher Yield

Less Volatile

Better Quality

Earnings Beats

Average Quality

Revenues Miss

Stable Momentum

Earnings Miss

Revenues Beats

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.04%)

6. Segments

Royalty

Expected Growth: 8%

Management Fees

Expected Growth: 10%

7. Detailed Products

Mr. Lube

Oxford Learning

Sylvan Learning

Stratus Building Solutions

Mr. Rooter

8. Diversified Royalty Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Diversified Royalty Corp. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

3.75$

Current Price

3.75$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA