Emera Inc (EMA.TO)

This is one of the few, along with Canadian Utilities (CU-T) that scores relatively cheap in terms of its discount to intrinsic value. 80% of its businesses are tied to recurring revenues and rate resetting revenues. These can move in lockstep with any inflationary pressures. As a result of pretty strong results, and the recent acquisition of Teco Energy in Tampa Florida, it gives management the confidence to be able to keep ranking up those operating cash flows. They also increased the dividend. Dividend yield of 4.38%.

(Market Call Minute.)

(Top Pick Jul 21/15, Up 20.31%) Fantastic business, regulated. It has been volatile over the last year. There is a nice little base from last fall. It will probably come off a little bit due to seasonality as August is a weak time for it and you get a bump up in Sept/Oct. He’d then like to add to it.

It is volatile but there is a base and then a nice trend line. They may have to issue some more equity and if they do he would decide if it was going to push the stock down. A great regulated business. Nice dividend. Weakness in earnings is due to some short term stuff.

Emera (EMA-T) or Fortis (FTS-T)? He is not that well versed on the individual specifics of each company, but his general view is that it is the safe stocks, all of the businesses that are perceived to be the least economically sensitive, that are what is stretching the values of the marketplace. When you look at the TSX at 20X earnings and the S&P 500 at just below 20X earnings this year, you are generally speaking of utilities. The reason is that people haven’t had any yields in bonds, so they are stretching for yield by dipping into bond equivalent stocks. He wouldn’t be a buyer of these types of businesses right now.

He is a long term holder. It is a growth utility. Extremely well run conservative company. The valuation is higher than it has ever been before. They do nice, big acquisitions, diversifying them away from the east coast markets they are in.

This has been a great stock in this environment. The company has good growth, they’ve grown the dividend, with a wonderful yield. The trouble is, what do they do for an encore? He was not a buyer at $45, and is certainly not one at $49. It’s a good hold if you own it. Hard to see their growth continuing, as the acquisitions they make are becoming more expensive.

(A Top Pick July 21/15. Up 19.76%.) What we have been seeing in the last few days are all these utility stocks coming to new highs. Also, they are coming into their seasonal time.

A little bit cheaper compared to where it could go. Has pulled back in the last week or so, which provides an OK entry point. Dividend yield just over 4%.

Probably one of those safe defensive plays, and slowly increases the yield over time. Dividend yield of 4.16%.

(Top Pick Apr 16/15, Up 18.5%) It did a significant acquisition which grew their presence in the US. EMA-T has really benefited from the sentiment of interest rates going up when they actually went down. Going forward the dividend is safe. He sees some upside because 70% of their assists are now in the US. You will see a life in the increased rates they get there.

(Top Pick Apr 16/15, Up 19.24%) It is not a growth name. The acquisition will be accretive to earnings over the next few years. They are projecting 8% dividend growth and it is currently a 2% yield. 6-7% yield without high risk. There will be a better entry point in the near future. Long term, it is not a bad entry point, or buy a half position.

Emera (EMA-T) or Fortis (FTS-T), or any other dividend stock in this market? Paying a dividend in this market is a great thing, however you need to look at the interest rate environment as well as the growth potential for each company. Utility in general is a slow growing business and both companies have made acquisitions in the US. He likes both, but this one’s yield is a little bit higher.

He has owned it for a couple of years. You get 4.25% dividend and modest share price appreciation. Their recent acquisition has grown their footprint in the US significantly, where they can charge higher regulated fees. 6-8% total return and you can sleep at night.

Ranks well in his program, but so far they haven’t had much earnings growth. Prefers others. Dividend yield of 4.2%.