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She’s used both this and Telus (T-T) as income stocks. Both have an attractive yield, close to 4.5%-5%. They generate a lot of cash flow, so will typically increase their dividend at a modest pace each year. They’ve done relatively well. She doesn’t expect a lot of capital appreciation, maybe 5% from here at best, plus the yield. Uses these for defensive and income purposes.
Hitting new multiyear lows. When they recently reported 3rd quarter earnings, they were asked about their dividend policy, where they had indicated they can grow their dividend 10%-12% annually to 2024. That’s been their stance for a number of quarters. The company said they were finalizing plans and would be addressing this at their investors day mid December. Feels this affected the stock. The market does not like uncertainty.
On her watch list. The investment thesis is that eventually they plan to spin out various operating divisions. The hope is that the sum of the parts is greater than the total. A cyclical name, so in an environment where you are seeing improving economic fundamentals, that is a positive. Has done relatively well and the pullback was maybe just for valuation measures.
A cheese/dairy processor. Just announced another acquisition in Australia. Good operators. The stock has done relatively well, but always trades at a premium valuation. It’s a consolidator, as there is not a lot of organic growth. Doesn’t see any compelling reason to own the industry. Other industries have more attractive growth rates. Dividend yield of 1.5%.
Take some profits or is there more room to run? The commodity is methanol and this is the leading producer. It is somewhat cyclical. The stock has done well. In a market pullback, concerns about economic growth, etc. the stock will likely pull back. She wouldn’t see any problems in taking some money off the table now.
She is going to continue holding this, even though Amazon (AMZN-Q) may enter the mail order drug delivery space. Feels they are well positioned. They have the infrastructure and their PBM service, so can compete if they have to. The multiple has really contracted, trading at about 12X forward earnings. There are rumours that CVS may buy a health insurance company, possibly Aetna, which has caused the stock to pull back. They are virtually integrating in that whole chain, and will eventually derive more scripts and more services into their retail network, which will help lower overall hospital costs.
Canadian utility companies seem to be making acquisitions for growth. She owns this in some of her utility accounts. Utilities are focused on renewables, which is a positive. A nice trend for the future. They recently made a $500 million equity issue, which is why the stock pulled back, as they usually do an issue below the market price. Longer-term, this is an attractive investment and offers an attractive dividend yield.
Increased their dividend by about 3.5%. Their results were fine, but have to make a decision on the big $3.1 billion petrol/chemical facility. They want to secure long-term “take or pay” contracts before building it, which will decrease exposure to the commodity price. If you didn’t own this, this would be a chance to build a position. The dividend yield is over 6%.
(A Top Pick Nov 15/16. Up 35%.) The valuation is not as attractive as it was a year ago. They’re executing well. Have had over 20% revenue growth for 21 consecutive quarters. Has a lot of cash overseas, which will be a benefit if the whole US tax reform comes in for repatriation of foreign taxes.
Markets. Earnings have been decent, but it needs to go on being strong to propel stocks higher. Third-quarter US earnings have been reported and are almost complete now. They came in better than the expected 5%. Coming in around 8%-9%. Indices are trading above historical averages, so she is not expecting any more multiple expansion to keep markets going higher. They really need that profit growth to keep going up.