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Douglas Kee.

Market Call

Douglas Kee is chief investment officer at Leon Frazer & Associates. His focus is on Canadian dividend-paying stocks.

Top picks:

Bank of Nova Scotia
Scotiabank remains the low-cost producer in the very competitive Canadian retail bank sector. The addition of ING Direct Canada (with a $30-billion deposit base) and growing wealth management group will aid profitability and reduce earnings variability. Its International banking business is still growing and is a higher margin business with less exposure to Canada. Current dividend yield is 4 per cent with upside potential of about 4 per cent to 5 per cent this year.

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Encana Corp.
This low-cost natural gas producer currently yields 4 per cent and has the ability to maintain its dividend this year. It has de-leveraged its balance sheet with a joint-venture agreement in Duvernay and sale of west coast LNG project. (Buy below $20.00.)

BCE Inc.
This motherhood stock has performed in line with market expectations over time. The current yield is 5.4 per cent, with management focused on increasing that payout, likely by 4 per cent to 5 per cent in 2013. Competitive with other big wireless players Rogers and Telus with improving metrics. It is a core holding in our portfolio, providing slower growth but lower volatility on the downside.

Past Picks: Jan. 12, 2012

Canadian National Railway Co.
Then: $79.30
Now: $92.99
Total return: +19.38 per cent

AltaGas Ltd.

Then: $29.28
Now: $33.34
Total return: +19.08 per cent

Bank of Nova Scotia

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Then: $52.20
Now: $57.55
Total return: +14.83 per cent

Total return average: +17.76 per cent

Market outlook:

We continue to believe that we are in a slow and choppy economic recovery that will take longer that previous recessions due to the de-leveraging of consumers' and governments' balance sheets. The Canadian equity market remains range bound from 12,500 to 13,500. Stay with dividend growing stocks as an alternative to cash or bonds that have lower yields and provide little return after inflation.

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