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John Heinzl is the dividend investor for Globe Investor's Strategy Lab. Follow his contributions here. You can see his model portfolio here.
Looking for bargains in the rubble of the market collapse?
You've got company in Norman Levine and Darren Sissons.
As commodity prices tumbled last year, the managing directors of Portfolio Management Corp. sold all of their mining stocks and most of their oil and gas producers, hanging on to only two names – Suncor Energy Inc. and ARC Resources Ltd.
Now, with a cash position in the "high teens," they're looking to redeploy some of that capital into non-resource stocks to take advantage of the market's recent belly-flop.
"As long-term investors, we don't mind down markets as they allow us to buy quality companies at temporarily lower prices," Mr. Levine said. "Our interest in commodity stocks, at this time, is very low as we prefer to wait for commodity prices to stabilize and start trending up rather than try to pick a bottom. We may have a while to wait on that count."
Here are five dividend stocks the firm owns and that it considers especially attractive at current prices. Remember to do your own research before investing in any security.
Enbridge Inc. (ENB)
Tuesday close: $44.07, up 53¢
Yield: 4.8 per cent
Of the five companies listed here, Enbridge is the only one that Portfolio Management has bought "in size" recently, Mr. Sissons said. Hammered by falling oil prices and concerns about potentially slowing growth, shares of the pipeline operator plunged nearly 40 per cent from April to December, even as Enbridge raised its dividend by 14 per cent last month and pledged to continue mid-double-digit increases through at least 2019, driven by $38-billion of "secured" and "highly probable" projects. "Nothing in the company's fundamentals or outlook have changed," Mr. Sissons said. With a price-to-earnings multiple of about 17.5 times 2016 estimates, a yield of 4.8 per cent and more dividend increases expected, Enbridge is "a very attractive total return stock," he said.
Canadian National Railway Co. (CNR)
Close: $71.70, down $1.50
Yield: 1.7 per cent
Mr. Sissons calls CN "the best-run railway in North America." One thing he likes it is that CN's exposure to the commodity business is lower than other North American railways. Yet the stock has tumbled nearly 20 per cent from its 2015 high and now trades at an attractive multiple of about 15.4 times estimated 2016 earnings per share and 14.4 times 2017 estimates. The yield of 1.7 per cent won't make you rich, but CN has increased its dividend at a compound annual rate of more than 18 per cent over the past five years. Mr. Sissons expects CN's earnings to grow by about 8 per cent in 2016 and 10 per cent in 2017, lifted by autos, forest products and intermodal freight transport, and he sees the dividend growing at an even faster clip.
Power Financial Corp. (PWF)
Close: $29.61, up 3¢
Yield: 5 per cent
Shares of Power Financial – whose major holdings include insurer Great-West Lifeco and asset manager IGM Financial – have skidded about 23 per cent from their high last March. Yet the company, which also has extensive interests in Europe through Pargesa Holding SA, is expected to increase its earnings by about 5 per cent in 2016 and 12 per cent in 2017, led by Great-West, Mr. Levine said. The stock sells at a "very modest" price-to-earnings multiple of about nine, based on 2016 estimates, and "the dividend was increased last year for the first time since the financial crisis and we see it being raised at least annually for the next few years," Mr. Levine said.
Sun Life Financial Inc. (SLF)
Close: $38.18, up 8¢
Yield: 4.1 per cent
"We believe Sun Life is the most attractive stock in the life insurance industry in Canada," Mr. Levine said. Trading at a multiple of about 10 times 2016 estimates, the stock is "very attractively priced" and the current yield of 4.1 per cent is also enticing, especially considering that the dividend is expected to grow by about 10 per cent annually. "Earnings growth is being led by core insurance operations as well as its quite sizable funds management business," Mr. Levine said. What's more, with the U.S. Federal Reserve finally in liftoff mode, "Sun Life will be a beneficiary of expected higher interest rates on bonds in the United States over the next couple of years," he said.
BCE Inc. (BCE)
Close: $54.48, up 39¢
Yield: 4.8 per cent
Led by growth in its wireless operations, BCE's earnings are expected to rise by about 5 per cent to 6 per cent annually, which should lead to similar growth in its dividend, Mr. Levine said. He considers the telecommunications company – which also has Internet, home phone, TV and media operations – a "low-volatility" pick and says the current multiple of about 15.2 times estimates 2016 earnings is "reasonable." If the pattern of recent years continues, the company will raise its dividend when it announces fourth-quarter results on Feb. 4.
Disclosure: The author owns shares of Enbridge and BCE personally and in his Strategy Lab model dividend portfolio (view it here).
John Heinzl