This is going to go higher. It could have been a Top Pick. He is looking for $32 over the next 12 months. Its earnings were up last quarter by 31%. He likes the recovery in steel prices, and their tubular segment, which is linked to the energy sector, which has been improving. The dividend is pretty safe right now. 80% payout ratio on EPS for 2017. Trades at a multiple that is below its peers.
He likes all the banks. However, in Q3 this bank had negative operating leverage, a -2.2%. Their US operations at flat earnings which were kind of disappointing. There is uncertainty on the street as to whether they can maintain their efficiency ratios. The weaker US$ hurts them a little. They have a very favourable Cdn/US business mix. This is one you can buy at around these levels.
A kind of illiquid stock that moves around a lot. There is a Short Seller piece out there that says they are not going to have enough free cash to meet their dividend. CapX has been elevated. Thinks the Short Sellers are wrong and that they are going to grow their earnings by 12% over the next couple of years compounded annually. He models a payout ratio of 96% for 2017 next year. Thinks you will get a good combination of dividend and upside from here. Dividend yield of 6%+.
(A Top Pick Sept 23/16. Up 1%.) Had thought at the time that 2017 was going to be an off year, but anticipates very good growth for infrastructure beyond this year. They just put themselves up for sale. Trading at around 6.4, and he thinks it should fetch a multiple of around 8.5 if it gets sold. Very good balance sheet.
(A Top Pick Sept 23/16. Up 13%.) At the time, it was cheap relative to its peers. It also had a good growth rate relative to its peers. Halifax is turning the corner and continues to shine. Their growth rate of 5.5% is a little less than it was then at 7%-8%. Their multiple is a little more expensive. This is still a Hold.
Just bought Sentry, which looks accretive to him, in the upper single digits. Bought First Asset about a year ago, as well as an Australian asset manager. He is modelling 9% earnings per share growth with about a 3% annual dividend growth. Trades at around 12X, versus its five-year average of 16X. Even though their MER’s are coming down, the margins still are at 42%. 71% payout ratio on its 5%+ dividend.
This continues to be a good time to own Canadian financials. Unfortunately, this is one of the weakest right now given their capital ratios and unproven results with their new private bank corp. They have to prove themselves somewhat. Trades at about a 15% discount to its peers, which is reflected in the price. All the Canadian banks are going to go higher. 3.8% dividend yield.
This has done well. People tend to pile into these things after they’ve done really well. After having a really good run and making some really good acquisitions, it is still not a bad multiple to its peers, at 17X, but he is only modelling 3.5% EPS over the next couple of years. There are better names out there.
Just had their Investor Day in New York, and they said “more of the same”. Thinks they are modelling 9% AFFO growth compounded annually over the next couple of years. They are comfortable with US bond yields, even between 3.5% and 4% in the US, and are still going to be a while to grow their business. A name that never seems to get cheap. You can still buy this, but wait for a bit of a pullback.
He likes this at these levels. He models an 8% EPS growth. Thinks you will get share buybacks and margin expansion. There is capital employment opportunity and tuck-in acquisitions. It is a pretty fragmented sector. The only bad thing is its price. It is trading at around 17X versus 15X its 5-year average. There are also the rising Cdn$ headwinds.
The only bad thing is that most earnings are from the US, and the rising Cdn$ is hurting them a little. It has an excellent growth rate. He is looking at 16% EPS over the next couple of years. Trades at the same multiple as its peers, 17X. Has a 61% payout ratio. The Empire acquisition is proceeding very well. If you can get this in the $12 range, you should buy it.