7% After Tax Yield on Container Leasing Company: a Wall Street Transcript Interview with "Best on the Street" Analyst Arthur W. Hatfield of Raymond James (RJF)

Wall Street Transcript

67 WALL STREET, New York - January 23, 2013 - The Wall Street Transcript has just published its Staffing, Outsourcing and Rental & Leasing Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Workforce Flexibility Requirements - Growth in Temporary Staffing Demand - Secular Trend Toward Temporary Staffing - Strong Demand For IT Staffing - Growth in Equipment Leasing Adoption Rates - Consolidation Potential in Fragmented Industry

Companies include: General Electric Co. (GE), CIT Group, Inc. (CIT), Ryder System, Inc. (R), TAL International Group, Inc. (TAL), Textainer Group Holdings Limit (TGH) and many others.

In the following excerpt from the Staffing, Outsourcing and Rental & Leasing Services Report, an award winning equipment leasing analyst from Raymond James discusses the outlook for the sector for investors:

TWST: You mentioned on the container side that you look at them as yield vehicles. Why isn't the market jumping up and down about them given the lack of yield in almost anything?

Mr. Hatfield: You know, if I knew that, I'd probably be able to better sell the investment idea.

TWST: When you talk to investors, what's the hesitance?

Mr. Hatfield: I think there is a disconnect with how people understand their business and the industry they serve. They lease containers to shipping companies. Shipping companies own ships that want to move those containers, and the supply and demand dynamics of those two industries are very different. A lot of investors comingle that thought process. You can have empty ships, but if you have no boxes, you can't move products, so really the bottleneck in the industry is on the container side, and we see containers being tight. So they are two different dynamics, but unfortunately we see a lot of investors looking at them as being one and the same and don't distinguish between the two significantly enough to appreciate the positive aspects of what's occurring on the demand side for containers.

TWST: What kind of yields are we talking about with these names?

Mr. Hatfield: Currently, Textainer is generating a dividend yield of 5.5%, and TAL International is a little below 7%.

TWST: So good solid yields.

Mr. Hatfield: Yes.

TWST: What is it going take to get investors to step up on these?

Mr. Hatfield: I think the biggest thing that will probably get these things to move would be once we get past any changes to tax law, I think people will be able to assess income instruments better on an after-tax basis.

TWST: I guess a change in tax treatment of interest income wouldn't do them so much good.

Mr. Hatfield: Well, you know, let's see - here is the catch. Most of these companies have very high levels of depreciation, and as such, for tax purposes they don't pay any cash taxes. And as a result, in most cases their dividends are nontaxable, treated as return to capital. So actually the yields that we talked about are after-tax yields.

TWST: OK, so better yet.

Mr. Hatfield: Absolutely. So I think actually once we get past the increase, I think these investments will look that much better. So once we have...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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