Karl Berger
Karl Berger is a partner at Toron Capital Markets, Inc. His focus is on global equities.
Top picks:
BostonPizza Royalties Income Fund
The Fund owns the Canadian trademarks of Boston Pizza International and licenses them to BPI in exchange for a 4 per cent royalty of Franchise Sales for restaurants that are in the royalty pool. Units carry an attractive 6.6 per cent dividend yield, which should be able to grow in excess of the rate of inflation given Boston Pizza's demonstrated ability to grow same-store sales.
TaiwanSemiconductor
Taiwan Semiconductor is well positioned to take advantage of a strong secular growth story in the semi-conductor industry. Manufacturing of chips is becoming more concentrated, and TSMC's technological advantages create the ability to add to market share and margin growth. Shares pay a reasonable 3.5 per cent dividend.
NextEra Energy
NextEra Energy just reached a positive rate settlement with the Florida regulator which should allow their regulated subsidiary to earn an attractive return on accelerated investment. The company boasts an unrivalled pipeline of both regulated and unregulated investment opportunities that should continue to drive attractive overall investment returns. Shares carry an attractive yield of 3.4 per cent, which should grow as pressures on renewable energy production subside.
Past picks (August 30, 2011):
TransCanada
Then: $41.79
Now: $45.75
Total return: +13.90 per cent
Ross Stores
Then: $76.44
Now: $69.70
Total return: +84.28 per cent
Diageo PLC
Then: £1205.00
Now: £1684.00
Total return: +44.17 per cent
Total Return Average: +46.78 per cent
Market outlook
Equity markets have put in a strong showing over the last several months despite a challenging macro-economic backdrop, and perhaps are realizing the value of stable, growing dividends relative to the meagre returns available in Government bond markets. However this is not the sort of market where investors should stretch too far for yield, and as such focusing on companies with solid balance sheets, a strong ability to generate free-cash flow, and an ability to grow their dividends is prudent.