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Ryan BushellMargaret Mulligan

Ryan Bushell is a portfolio manager at Leon Frazer and Associates. His focus is on large-cap Canadian dividend stocks.

Top picks:

Cenovus Energy Inc.

I recommended this stock a year ago and subsequently throughout 2013 as the company struggled through relatively minor operational issues and wide Canadian heavy oil price differentials. The company increased its dividend by 10 per cent each of the last two years and we expect a similar increase in 2014. Cenovus has one of the most attractive long-term growth profiles of any oil producer and they should be free-cash-flow positive towards the end of the decade. Additionally, the falling Canadian dollar combined with almost 1-million barrels of oil per day of heavy oil take-away capacity coming on stream in 2014, bodes well for Cenovus' netbacks. ~3.25-per-cent dividend yield which is the highest of the major oil sands producers, with good future growth in their dividend.

Thomson Reuters Corp.

This is a company we have held for quite some time and it had a great run in 2013. We continue to think the future is bright for this company. Momentum is picking up in their key markets (U.S., global and, to a lesser extent, Europe), a falling Canadian dollar is a tailwind, and they continue to grow their dividend consistently. They are one of Canada's only truly global technology companies with a globally recognized brand. TRI's next generation legal and financial products combine many elements of the "consumer internet" including smart search (google), integrated video content from Reuters (youtube) and social networking abilities (Twitter, Facebook, LinkedIn etc.) that will be desired by the next generation of professionals. ~3.50-per-cent dividend yield provides a nice chunk of total return.

Baytex Energy Corp.

Similar to Cenovus, Baytex stands to benefit from better Canadian dollar margins on their heavy-oil production. As a pure upstream producer Baytex stands to benefit even more than Cenovus from improved heavy oil pricing but their production growth profile is more modest. Baytex has a ~6.6-per-cent dividend yield so the stock price does not have to move much to give you a nice total return and they could announce a dividend increase later in 2014 or early 2015.

Past Picks: January 3, 2013

Crescent Point Energy

Then: $36.28; Now: $39.39; Total return:+16.58 per cent

BCE Inc.

Then: $42.99; Now: $46.63; Total return: +14.21 per cent

Cenovus Energy Inc.

Then: $33.48; Now: $29.59; Total return: -8.80 per cent

Total return average: +7.33 per cent

Market outlook:

As we look ahead to 2014, we expect another solid year for the Canadian equity market, but are more cautious on the U.S. market given the rapid price appreciation over the last two years. We believe the U.S. economy is poised to accelerate as the private sector is finally strong enough to withstand stimulus withdrawal and still post 3%+ GDP growth. Canada is expected to grow more slowly. We are maintaining our 1- to 3-per-cent growth path for the Canadian economy as export strength from a softer Canadian dollar will be tempered by a cooling housing market and stimulus withdrawal.

Our view for the North American equity markets is the reverse of our economic view. Stock markets are a leading economic indicator. Although we believe economic growth in the U.S. will outpace Canada, a lot of good economic news is already priced into the U.S. market. Meanwhile, the Canadian market has a dividend yield that is a full 1 per cent higher than the U.S. market, with two of its three largest weighted sectors (materials and energy) posting decidedly negative returns for three straight years. These factors give us a healthy amount of optimism about Canadian market performance going forward in 2014 and beyond, despite a somewhat tepid economic backdrop.

Editor's Note: An earlier version of this article gave an incorrect current price for Cenovus Energy Inc. This version has been corrected.