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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BMO chief strategist Brian Belski reaffirmed his belief in dividend growth stocks as his preferred in investment strategy and he offered a list of dividend growth potential stocks,

“Dividend-based strategies meaningfully outperformed in 2022, with dividend-paying stocks in the TSX down just 2 per cent on average during the year, ahead of the negative 6-per-cent total return seen by the S&P/TSX composite and well ahead of the 17-per-cent average decline seen by non-dividend paying stocks … Overall, despite the slight underperformance year to date, we believe income-based strategies remain well-positioned to outperform again in 2023, particularly as the market struggles with the end of the interest rate tightening cycle, elevated but declining inflationary levels, and recession risk. While our work shows S&P/TSX dividend payers can outperform in many market environments, including periods when the TSX is up over 10 per cent year-over-year, these dividend-based strategies typically post some of their best relative performance when inflation is above the three-year average and falling - like it is now”

Mr. Belski presented a list of dividend-paying stocks where strong free cash flow allows for dividend increases. These are ARC Resources Ltd., Algoma Steel Group Inc., Alimentation Couche-Tard, Boardwalk REIT, Birchcliff energy Inc., CCL Industries Inc., Crescent Point Energy, Constellation Software, Cenovus Energy, Dollarama Inc., BRP Inc., Enerplus Corp., Gildan Activewear Inc., Hudbay Minerals Intact Financial Corp., Interrent REIT, Imperial Oil Ltd., Metro Inc., Methanex Corp., Nutrien Ltd., Paramount Resources, Pason Systems Inc., Parex Resources, Stelco Holdings Inc., Tricon Residential Inc., Spin Master Corp., Waste Connections Inc., Whitecap Resources Inc. and West Fraser Timber Co.

“BMO: Canadian dividend growth potential stocks” – (table) Twitter


Deutsche Bank chief strategist Binky Chadha assesses why a U.S recession is running late,

“Six months ago, we concluded they were consistent with a descent into recession but were not signaling one had begun. What do they say now? Claims, the best single indicator historically, are still sending mixed signals; the best composite indicator, the Leading Economic Indicators index, is clearly flashing red; our preferred approach, using a wide set of indicators, sees many more leading indicators as having turned down, with many suggesting a recession should have begun already. However, indicators that lag are still mixed, so we have gotten closer, but are not there yet and running late. Why is the recession running late? There are 3 well known reasons: strong household and corporate balance sheets; companies hesitant to fire soon after widespread difficulty in hiring; and excess savings accumulated around the pandemic”


National Bank economists Stefane Marion and Daren King argue that the Bank of Canada is playing with fire where mortgage debt is concerned,

“The Bank of Canada’s (BoC) latest rate hike will not go unnoticed by the 30 per cent of Canadian mortgage holders who have variable rate mortgages. As today’s Hot Chart shows, between 73 per cent to 80 per cent of variable-rate fixed payment mortgages originated between 2020 and 2022 will have been triggered during the current central bank tightening campaign. For variable rate mortgages taken out before 2020, the proportion will be 63 per cent, compared to only 25 per cent three months ago. This is what we meant when we said recently that the negative impact of marginal rate increases is not linear at this stage of the economic cycle.”

“Canada: BoC is playing with fire” – National Bank Economics


Diversion: “The People Who Don’t Read Books” – The Atlantic

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