Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Six dividend-growth stars that have aced the past 12 months
Quite a few dividend stocks have been disappointments in the pandemic of 2020, Rob Carrick writes. Even some dividend-growth stars have been roughed up. Gildan Activewear, for example, has raised its dividend by an annualized 18.9 per cent over the past five years, but has suspended the payout because of the economic hit from the pandemic. But there are other dividend growth stalwarts surviving the stock market turmoil in good shape. Here are six examples listed on the TSX, including Metro, Dollarama and Fortis.
My students found a rare undervalued stock that fits the Warren Buffett mould
This year, unlike most of the recent decade, picking value stocks for the final class project was like picking lilies in the valley for my students at Ivey Business School, George Athanassakos writes. The market correction enabled them to find and write a report on undervalued stocks, not only among the Ben Graham type of stocks, but also among Warren Buffett type of stocks – something that I have not seen for years.
The Buffett-type stock, Douglas Dynamics, also met some of the Graham value investing criteria. The students felt the stock could be potentially undervalued and worth exploring further. Douglas Dynamics is a clear leader in the work truck attachment segment with 55 per cent market share, well ahead of its two largest competitors. It has been operating for about 70 years, allowing it to develop customer loyalty and brand equity. You can read more about it here. Here you can read about the students’ Graham style pick, Fonar.
Big-name stocks axed from blue-chip S&P/TSX 60 index
Two legendary names of Canadian business that have seen better days – Bombardier and BlackBerry – will be removed from the blue-chip S&P/TSX 60 later this month, David Milstead writes. They will be replaced by Algonquin Power & Utilities and Canadian Apartment Properties REIT, known as CAPREIT. S&P Dow Jones Indices also removed Bombardier from the S&P/TSX Composite Index, the broadest measure of the Canadian market. All told, The index manager added seven companies and removed 14 from the S&P/TSX Composite.
With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the companies. Canadian stocks added to the composite, which has about 230 to 240 members can see a price bump before and even after inclusion. Similarly, companies removed from the index lose a source of demand for their shares. See the full rundown of changes here.
Mind the taxes when transferring shares in-kind
You do not need to sell and repurchase your investments, John Heinzl responds to a reader who wants to put unsheltered stock into a tax-free savings account. You can transfer the shares “in-kind” to your TFSA, which will avoid brokerage commissions. However, when you transfer shares in-kind to your TFSA (or registered retirement savings plan), for tax purposes you must still report the transfer as if it were a sale, using the fair market value of shares at the time of the transfer as the “sale” price to calculate your capital gain. (Only 50 per cent of capital gains are added to your income and taxed.)
If you transfer shares with unrealized losses, however, you are not permitted to use those losses for tax purposes to offset your capital gains. That’s because, when you maintain ownership of the shares, the Canada Revenue Agency considers it a “superficial loss." You can read more here about the tax implications.
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Why you should be wary of buying this dip in TSX energy stocks
Canadian energy stocks are in trouble again, as sharp declines on Thursday outpaced a meltdown by the broader market, David Berman writes. But be wary of buying this dip: The share prices of large energy producers had been reflecting an optimistic scenario for oil prices in recent weeks – and this scenario is withering.
The problem for energy stocks is that the rebound in the price of crude oil left the stocks vulnerable to a setback. Less than six weeks ago, the price of WTI languished at just US$18 a barrel as demand for energy vanished. On Monday, though, WTI surpassed US$40 a barrel, boosting energy stocks to such remarkable heights that analysts re-examined the underlying assumptions for the price of crude oil in large Canadian oil producers.
What investors need to know for the week ahead
In the week ahead, Canada’s inflation figures for May will be released on Wednesday. Other economic data on tap include: Canadian existing home sales for May, as well as wholesale sales, manufacturing sales and new orders for April (Monday); U.S. retail sales and industrial production for May, plus business inventories for April (Tuesday); U.S. housing starts and building permits for May (Wednesday); Canada’s new housing price index for May and wholesale trade for April (Thursday); Canada’s retail sales for April (Friday).
Companies releasing their latest earnings include Oracle and Sobeys parent Empire Co.
Looking for more money ideas and opinions?
- Top Canadian stock picks for ‘disciplined value’ investors
- How the CRA may try to identify fraudulent CERB claims
- The highest yielding stocks on the TSX, plus risk data
- How investors should react to the explosive mix of uncertainties they now face
- Mixed signals? A bank offers a record breaking low fixed mortgage rate just as CMHC tightens lending rules
- For once, mutual funds aren’t trounced in a comparison with ETFs
- How to approach investing at a time of a global pandemic