Douglas Kee, Chief investment officer for Leon Frazer & Associates.Market Call
Douglas Kee is chief investment officer at Leon Frazer & Associates. His focus is Canadian dividend-paying stocks.
Top Picks:
Enbridge (ENB.TO)
It is not very often that we get a buying opportunity in ENB. The shares have traded down from a high of $65 to the $55 area, reflecting the softness in the energy sector. At the current price the stock yields 3.4 per cent, and we expect 10- to 15-per-cent dividend growth per annum over the next few years based on current income generation and a fully secured capital investment program in excess of $20-billion.
Cenovus Energy (CVE.TO)
CVE shares yield 3 per cent and are well off the bottom at $16 per share but still remain attractive. The company now has one of the strongest balance sheets in the energy sector due to equity issuance, a dividend cut, capex delays and asset sales. The company has long life, low cost oil sands production with the ability to grow production fairly quickly as energy prices normalize.
Royal Bank (RY.TO)
RBC shares have trended down with other bank shares and currently provide an attractive yield of 4.3 per cent. Our expectation is for mid-single digit dividend growth over the next few years. In Canadian retail banking the bank's scale is a distinct advantage. The bank continues to grow in wealth management and capital markets.
Past Picks: September 4, 2014
Fortis (FTS.TO)
Then: $34.10 Now: $38.97 +14.01% Total return: +18.12%
Crescent Point Energy (CPG.TO)
Then: $43.09 Now: $20.46 -52.52% Total return: -47.56%
Sun Life Financial (SLF.TO)
Then: $41.36 Now: $44.66 +7.98% Total return: +12.04%
Total Return Average: -5.80%
Market outlook:
As of last Friday's close, both the S&P 500 index and the S&P/TSX composite were down in local currency terms and volatility remains high. Markets have been challenged by modest global economic growth, the threat of higher interest rates and a softening corporate earnings outlook. At the beginning of the year we had a fundamental Canadian market trading range forecast of 13,000 to 15,000; this range has been surpassed on the upside and the bottom has now been tested twice. Our outlook for the remainder of this year and 2016 is cautiously optimistic given moderate economic growth, a very modest upward bias to interest rates and single digit earnings growth. We remain committed to companies that provide a current yield and the potential for increased dividends in the future.