Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO chief investment strategist Brian Belski is predicting a big surge in Canadian dividend payouts,
“As we begin to ponder the stock market outlook for 2022 and beyond, we believe recent earnings strength places Canadian companies in a strong position to begin redeploying excess cash balances and cash flow in the form of both investments and cash distribution. In fact, the TSX has exhibited an epic positive surprise cycle that has translated into one of the sharpest earnings rebounds on record. This, according to our work, is likely to generate an impressive, if not ambitious dividend growth cycle that could see overall dividend growth surge well above historical averages over the next 12-24 months. As such, we believe investors should begin positioning in areas that are likely to increase dividends and share buybacks.”
Mr. Belski included his 40-member top stock picks list for North American dividend growth. The Canadian names [in alphabetical order] are Algonquin Power and Utilities Corp., BCE Inc., Brookfield Infrastructure Partners LP, Canadian National Railways Co., Enbridge Inc., Manulife Financial Corp., Power Corp. of Canada , Restaurant Brands International Inc., Royal Bank of Canada, Telus Corp., Toronto-Dominion Bank, and TC Energy Corp.”
“@SBarlow_ROB BMO: NA Dividend growth portfolio” – (full table) Twitter
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Houston-based Financial Times reporter Justin Jacobs detailed a potential jump in U.S. shale oil production,
“Forecasters project that the nation’s crude oil output will increase by about 800,000 barrels a day over the course of 2022, accelerating sharply from this year and making the US the fastest-growing supplier outside of a producer alliance that includes members of the Opec cartel. Marquee oil companies are not driving the rise. Instead, privately held producers, often smaller companies, will account for more than half of total US output growth next year compared with about 20 per cent in a typical year, said Raoul LeBlanc, an analyst at IHS Markit. "
The fact that these producers are private companies, and therefore largely immune from ESG-related portfolio restrictions to raise cash, is an interesting development. The production increase will, of course, weaken upwards price pressure on the crude oil price.
“US oil output to climb again despite restraint of big shale drillers” – Financial Times (paywall)
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RBC analyst Michael Harvey is bullish on the prospects for Canadian natural gas producers,
“Global natural gas fundamentals remain strong and with our outlook calling for considerable FCF to be generated amid the Canadian gas group in 2022, capital allocation remains top of mind as producers remain disciplined and return of capital programs play out. Controlled growth within a now more consolidated basin (top 5 producers control ~50% of the basin) will be key en route to mid-decade LNG Canada commissioning; currently ~59 Canadian gas rigs are operating as the fall budgeting season approaches… Average 2022 AECO prices remain strong at ~C$3.60/GJ and well above basin supply costs which we estimate at $2-2.50. This dynamic is backstopped by continued strong [natural gas-related] liquids pricing.”
The report does not include top stock picks in the sector, but Mr. Harvey has outperform ratings on Tourmaline Oil Corp., ARC Resources Ltd. and Birchcliff Energy Ltd.
“@SBarlow_ROB RBC is bullish on Canadian nat gas producers (research excerpt) Twitter
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Newsletter: “Rising tide will no longer lift all commodity boats” - Globe Investor
Diversion: “What Germany’s Far Right Has Taught Us " – The Atlantic
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Scott Barlow