Emera Inc (EMA.TO)

It is a really defensive name with a great yield. They are a really diversified power producer in the North East US and Eastern Canada. They should be able to grow the dividend over the next year. It is a really well managed company.

A utility stock? This has run up a lot, and he wouldn’t expect the same rate of return on a go forward basis. Focused on growth and bought a large acquisition in the US. That will provide them with upside and growth potential, and they’ve indicated that they expect a 8%-10% dividend growth trajectory.

A good utility. It has low return on capital, like most utilities. Good valuation and they can support their dividend. He sees no issues going forward.

(A Top Pick Feb 11/16. Up 10%.) They have done a great job in expanding. Did a large acquisition last year which gave them a significant presence in the US. They’ve given guidance that the dividend should grow 8% per year. He is still buying this for new clients. Dividend yield of 4.4%.

Emera (EMA-T) or Fortis (FTS-T)? These 2 are new plays, so they behave similarly. Fortis is the winner. It is retesting old highs. The chart shows a whole series of higher lows. Buyers are willing to pay progressively higher prices for it. The chart is showing some fatigue in the latter part of 2016. Wait for a lower price for a couple of months, and see how it trades.

*Short* (Top Pick Nov 9/16, Up 1.08%) They have a large business in Florida that is very coal focused. It is an interesting short. It should really under perform equities.

These stocks tend to underperform this time of year. EMA-T is in a distinct down trend, breaking to new lows. It is below the 20 day moving average and momentum indicators are negative. There have to be better opportunities.

Selling their interest in Algonquin Power (AQN-T). Their holding was really not that significant, and he is a little concerned about the utility group in this environment, where he expects the federal reserve to kick up rates on the 15^th. If you are really keen on utilities, he would stand back and wait. You can get better rates elsewhere without that rate risk looking over your shoulder. This is not the time to rush in.

Sell? He owns no utilities, because there are only 2 ways to make money when you own them. 1.) They get earnings growth because regulators allow their rate base to grow. 2.) Interest rates fall. When he looks at utilities globally, he can find few with rate base growth. Also, if he thinks rates are going up, he wouldn’t touch any utility with a barge pole.

A good Canadian utility. Super consistent, very reliable. The dividend payout ratio is in a very reasonable range. Good valuation.

It has come back a little bit. The down side risk is about $36 according to a 5 year chart. He thinks the economy will slow rather than strengthening on the new policies from Trump. He is nibbling away on ZWU-T, which holds EMA-T. EMA-T could easily fall to $36, however.

He was looking at it a while back and decided not to buy it because seasonally utilities don’t do as well through the winter. They seem to be rolling over now. There may be a sympathy move in Canadian utilities to their US counterparts dropping due to interest rate rises. It cracked the 200 day moving average. We could get it going down to $41 to $42.

Has owned this for a long time, and plans to continue to do so. All interest rate proxies are selling off right now. He is very interested to see if that is just a blip or a trade, or if there are actually legs to this. Either way, this company is going to survive. Their acquisition looks quite positive. Even if there is rising interest rates, the Dividend payout of about 4.5% is still well in excess of 10 year bonds, and is increasing at a rate that is pretty significant. He is waiting for this trade to kind of play out, and then he is going to take a look to see if he will be adding to some of these utility and telco holdings.

*Short* It is a call on interest rates and he has been right so far. It is in a low growth/high debt situation. They acquired a utility in Florida and the result is an enormous amount of debt.

Fortis (FTS-T) or Emera (EMA-T)? Fortis used to be Canada’s growth utility, and is still a growing utility, but Emera seems to have taken its place. Both companies have made major acquisitions in the US. Now that this has Teco Energy, they probably have more of their earnings coming from the US then from Canada. Keep in mind that there is an interest rate risk for utilities. This gives a nice dividend of 4.5%, and they have a history of raising it regularly. Don’t have a huge percentage of your portfolio in companies that will be hurt by rising interest rates.