BofA Securities is extremely bullish on the prospects for nuclear power and heralds an imminent bull market for uranium prices. This optimism is accompanied by surveys showing growing acceptance that nuclear power will be a significant contributor to decarbonization.
BofA’s Research Investment Committee (RIC) called their monthly research report The nuclear Necessity. The committee outlined two reasons for higher uranium prices in addition to decarbonization.
First, Russia’s invasion of the Ukraine underscored European nations’ dependence on Russian natural gas and increased the demand for national energy security.
Also, with 60 new reactors under construction and 100 more approved, BofA mining analyst Michael Widmer believes that uranium supply will lag demand. Subsequent shortages will push the commodity price higher by between 20 and 40 per cent in his estimation, in the relatively near future.
In the short term, the RIC sees the potential for sanctions on Russian uranium that would limit supply. Nuclear power will become more prevalent as that plays out.
Nuclear power is also becoming more popular. A recent Gallup poll found that 55 per cent of Americans support the construction of new reactors, the highest number in over a decade.
Saskatchewan’s Cameco Corp. (CCO-T) is listed by BofA as one of the stocks that will benefit most from the trend. The others are Constellation Energy Corp. (CEG-Q), Vistra Energy Corp. (VST-N), and BWX Technologies Inc. (BWXT-N). The report also mentions the Global X Uranium ETF (URA-A) for investors looking for a diversified vehicle. Domestically, there is the Sprott Physical Uranium Trust (U-UN-T).
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Trisura Group Ltd. (TSU-T) Shares in this specialty insurance provider have been volatile this year but the sell-off may be creating a buying opportunity for long-term investors, says Jennifer Dowty. Analysts are expecting a big comeback for the stock. The forecast average one-year return is nearly 70 per cent, and the stock has a unanimous buy recommendation from seven analysts. One catalyst may be the company’s first-quarter financial results this Thursday.
Superior Plus Corporation (SPB-T) The share price of this 7 per cent yielding stock rallied Wednesday after reporting its latest financial results. The share price closed at a 52-week low last week, and given this decline, the stock is trading at an attractive valuation. As Jennifer Dowty tells us, analysts are predicting shares in the energy distribution company will produce total returns of 40 per cent over the coming 12 months.
These three mid-cap energy stocks continue to pay off
Oil prices have softened a little recently, but Gordon Pape’s mid-sized energy recommendations continue to generate nice returns for income-oriented investors. Here he updates three of them.
Don’t be seduced by the juicy yields of covered calls
There are few investments that investors love more than those that spin out regular cash payments. One such strategy – Covered Call Writing – is attracting a lot of attention and investor dollars. Many investors view this strategy as generating extra yield. While it boosts up-front cash flow, this strategy is not what investors think it is, says veteran investing analyst Dan Hallett.
Also see, from Globe Advisor: Generating tax-free income in TFSAs with covered-call ETFs gains popularity
Options investors guard against U.S. stock tumble, despite buoyant markets
Options market demand for insurance against a stock market crash has soared to multi-month highs, even as equities have calmed down after a choppy start to the year, as Saqib Iqbal Ahmed of Reuters reports.
Practising patience and ignoring headlines: Investing in the Rogers-Shaw deal
The Contra the Heard Investment Newsletter owned Shaw Communications for years, and did quite well from it, with a capital gain of nearly 100 per cent. What’s next for telecom investors? Contra writer Philip MacKellar thinks owners of Rogers Communications or Quebecor stock may experience turbulence over the next few quarters.
The U.S. dollar is at risk of losing its dominance in capital markets. It’s time for investors to diversify overseas
The possibility of the U.S. dollar losing its role as the world’s reserve currency is deservedly getting a lot of attention of late. Investors should take heed, says Tom Czitron, and consider gaining exposure to overseas assets.
How Wall Street is preparing for a debt ceiling showdown
If the federal government defaults on its debt, the effects could be disastrous, threatening to undermine the role of the United States at the heart of global finance and tip its economy into recession. But after the government hit its debit limit and approaches the day when it runs out of cash to pay its bills, the stock market is showing no signs of panic. The S&P 500 is up more than 7% for the year. Joe Rennison of The New York Times explores what’s going on.
Others (for subscribers)
Number Cruncher: Eight banks that could benefit from the U.S. regional banking crisis
The Financial Times: With a liquidity crisis looming, investors must switch their thinking
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.
Ask Globe Investor
Question: I like the holdings of the BMO Canadian Dividend ETF (ZDV-T), but its performance has been poor. Is this because the fund is chronically paying out more than it collects in dividends?
Answer: I don’t know what time period you are looking at, but I wouldn’t characterize ZDV’s performance as “poor.” I’d say “average” is more accurate.
For the 12 months ended March 31, ZDV posted a total return of about negative 6.4 per cent, assuming all dividends were reinvested. That’s not great, but it’s only slightly worse than the S&P/TSX Composite Index’s total return of negative 5.2 per cent over the same period. ZDV’s returns are also in line with those of other dividend ETFs.
Stocks in general, and dividend stocks in particular, struggled over the past year as the sharp rise in interest rates caused share prices to fall and dividend yields – which move in the opposite direction – to rise. More recently, however, as inflation cools and interest rates appear to have peaked, dividend stocks have been rebounding. Year-to-date through April 27, ZDV posted a total return of 7.1 per cent.
Regarding ZDV possibly paying out more than it collects in dividends: I don’t think there’s anything to worry about here. Over the past year, ZDV has paid a cash distribution of seven cents a month, or 84 cents in total. Based on ZDV’s current market price of $20.09, the dividend yield is about 4.2 per cent. That is in line with the yields of the banks, telecoms, pipelines, insurers and utilities that account for a majority of ZDV’s holdings.
In recent years, ZDV – like many other dividend ETFs – has included a small amount of return of capital in its distribution. In 2022, for example, about 13.8 cents was classified as ROC. However, this isn’t necessarily a case of the ETF paying out more than it collects from dividends. ETFs that are growing and bringing in more cash from investors often classify a portion of their distributions as ROC for accounting purposes. Those that have a fixed monthly distribution also use ROC to smooth out the lumpy dividends from stocks in the underlying portfolio.
ZDV is a well-diversified dividend ETF, and its management expense ratio of 0.39 per cent is reasonable. If you’re having trouble deciding which dividend ETF to buy, there’s no reason you can’t choose more than one. In my personal portfolio, I hold both ZDV and the iShares Canadian Select Dividend Index ETF (XDV-T), as well as several ETFs that track the major Canadian and U.S. stock indexes.
Just as important as the specific ETFs you choose is your behaviour as an investor. Buying and holding through good times and bad, and reinvesting your dividends along the way, is a proven way to build wealth.
What’s up in the days ahead
Gordon Pape looks at two transportation stocks that you may want to put on your watch list.
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Compiled by Globe Investor Staff