Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
CIBC ‘s head of portfolio strategy Ian de Verteuil took an in-depth look at Canadian dividend stocks, with very bullish results,
“Dividends have typically made up one quarter to one third of annual equity returns, though they have been dwarfed by price returns in recent years … The ‘quality’ of S&P/TSX dividends has improved meaningfully. Today, over 70% of total dividends are from more stable sectors compared to 54% in the early 1990s. Furthermore, the yield advantage of Canadian equities over U.S. equities is the largest it has been in over three decades. This argues for Canadian equities over U.S. equities … Today, roughly one third of S&P/TSX members have a five-year track record of consistent dividend increases compared to 20% in the early 2000s. Furthermore, Financials, Utilities, Telecoms and Pipelines (which have a better track record of maintaining dividends) today represent a high proportion of all index dividends … It is … useful to consider the specific securities which we can only describe as “Dividend Dynasties.” These companies have had more than 10 dividend increases, and have not cut their dividend, over the past decade. By and large, the stocks have produced strong compounded growth in dividends.”
The list of Dividend Dynasty’ stocks is ranked by the ten-year compound average growth rate in dividend payouts.
The top 20 on the list (in order) are Restaurant Brands International Inc., Brookfield Asset Management Inc., Enghouse Systems Ltd., Enbridge Inc., CCL Industries Inc., Canadian Natural Resources Ltd., Magna International Inc., Franco-Nevada Corp., Canadian National Railway Co., Metro Inc., Canadian Tire Corp. Ltd., Waste Connections Inc., Cogeco Communications Inc., Equitable Group Inc., ATCO Ltd., Brookfield Infrastructure Partners LP, Algonquin Power and Utilities Corp., Canadian Western Bank, Toronto-Dominion Bank and Brookfield Renewable Partners LP.
“@SBarlow_ROB CIBC picks Canadian ‘Dividend Dynasty’ stocks” – (full table) Twitter
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Citi U.S. equity strategist Tobias Levkovich released The Three Most Disconcerting Charts We Are Seeing on Wednesday,
“With valuation no longer being attractive, any catalyst for weakness need to be monitored carefully… Our Panic/Euphoria Model remains very elevated and is warning of coming losses. This is the longest period of ebullient readings without a market correction since 1999/2000 and we anticipate that something will give. We have stressed on many occasions that we do not think current conditions represent a broad stock market bubble (as was the case more than two decades ago) but there are smaller areas within indices that look speculative and may face a day of reckoning. Thus, a 10% downdraft seems quite reasonable to us … The closest relationship between the US equity market and economic surprise data has been with the G-10 index. While many tend to focus their attention on the US specific metric, the global nature of S&P 500 constituents with almost 30% of sales coming from international regions means that other major economies are important too. The G-10 numbers peaked in September 2020 and have been in clear decline since mid-June, yet stock prices have edged higher, creating the potential for an air pocket … The sharp increase in WTI from lows last year also has impact if we look at history looking out 18 months. We have found that there is respectable predictive power on crucial economies when oil prices wax or wane. In this respect, there could be some trouble forming for 2022.”
“@SBarlow_ROB Citi: “The Three Most Disconcerting Charts We Are Seeing”” – (research excerpt) Twitter
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Scotiabank strategist Jean-Michel Gauthier notes that for Canadians, “You Can’t Buy a House if No One’s Selling,”
“July saw the fourth consecutive monthly drop in Canadian housing sales according to data published on Monday by the Canadian Real Estate Association. Sales had hit an all-time high in March and now seem to be slowly normalizing. ... The number one issue facing potential Canadian home buyers is the lack of available properties on the market. While buyers were already storming the housing market by June 2020, sellers (blue line) took a tad longer to respond, and new listings never seriously exceeded prior peaks. A large inventory build-up of unsold newly completed homes has also been run down to its lowest levels since at least the 1980s (green line). Even at currently high levels of new housing starts (272k on an annualized basis, released yesterday), it may take years to bring the market back into equilibrium. Overall, this does suggest that despite a probable slowdown in housing activity, it is unlikely to result in a housing price recession: the pool of unfulfilled buyers should keep putting on bids as soon as supply comes to the market.”
“@SBarlow_ROB BNS: Canadians can’t buy house if no one’s selling’ – Twitter
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Newsletter: “Why Michael Mauboussin’s work is essential for new and experienced investors” – Globe Investor
Diversion: “Scientists Grew a Brain-Like Blob With Primitive Eyes” – Gizmodo
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Scott Barlow