Sandy McIntyre is president and chief executive officer of Sentry Investments. His focus is on income investing.
Microsoft is one of the great multinational success stories. It has grown earnings per share by 12.5 per cent compounded annually for the past decade and dividends by 15.2 per cent since it established a dividend policy five years ago. Today the company trades at a discount valuation of 9.3 times earnings with an indicated dividend yield of 3.42 per cent.
Suncor Energy Inc.
Suncor is a bit of a contrarian call: Oil sands production is out of favour and oil sands growth stories have been rewarded with declining return on assets and equity. A change at the top for Suncor has introduced a new dynamic to the company: Growth cannot come at the expense of return on capital and return on equity. It has entered the free cash flow phase of its expansion and trades at discounted multiples – 9.3 times earnings and 4.8 times cash flow.
Magna International Inc.
Magna in the post-Frank Stronach world is a dominant auto parts supplier with a pristine balance sheet, committed to shareholder-friendly strategies: Control leverage, buy back shares and pay dividends. The valuation is extremely cheap, 5.5 times cash flow and 9.1 times earnings; while return on equity of 12.6 per cent is quite strong.
Past Picks: Sept. 07, 2011
Norfolk Southern Corp.
Total return: –4.24 per cent
Western Union Co.
Total return: –17.48 per cent
Total return: +7.02 per cent
Total Return Average: –4.90 per cent
There have been very few constants in my career as a money manager, but one has been inflation. We own equities of strong companies that can increase their earnings and dividends to offset the impact of inflation. Never lose sight of the fact that a 2-per-cent inflation rate halves the purchasing power of your capital in 36 years.