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This week, National Bank Financial updated its “Dividend All-Stars” portfolio for the second half of 2018, replacing three securities in its holdings of 25 stocks.

There are three key criteria for inclusion in the portfolio. First, each security must provide investors with an annualized yield of 4 per cent or higher. Second, dividends or distributions are expected to be sustainable, and optimally, have the potential to increase. Lastly, the share or unit price of each security is anticipated to have upside potential as determined by the analyst covering the stock. In other words, the security should have positive price return expectations.

During this rebalancing, three securities were replaced in the portfolio. The stocks removed were Canadian Imperial Bank of Commerce (CM-T), Horizon North Logistics Inc. (HNL-T), and the recently acquired company, Student Transportation Inc. CIBC was removed from the portfolio to accommodate a security with superior yield attributes. Horizon North Logistics was removed from the list given its stellar price action, which has reduced its yield to below 4 per cent. The three additions were Chemtrade Logistics Income Fund (CHE.UN-T), Great-West Lifeco Inc. (GWO-T) and Innergex Renewable Energy Inc. (INE-T).

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A brief investment thesis for each security that was added to the portfolio is highlighted below along with the complete list of the securities held in National Bank’s “Dividend All-Stars” portfolio.

Chemtrade Logistics Income Fund (CHE.UN-T)

Endri Leno, the analyst covering this security, has an “outperform” recommendation and target price of $18.25. He believes the security offers value to investors given its low valuation, high yield and conservative payout ratio. The security is trading at forward enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiple of approximately 7 times, at the bottom end of its historical trading range of between 7 times and 9.5 times. The Fund’s current yield is attractive at 8 per cent and the analyst forecasts the payout ratio will be 77 per cent in 2018.

Great-West Lifeco Inc. (GWO-T)

Analyst Gabriel Dechaine has an “outperform” recommendation and target price of $39. Mr. Dechaine favours the stock given its healthy balance sheet, attractive yield of just under 5 per cent with a dividend increase announcement anticipated later this year, and earnings growth driven by cost-cutting measures. The analyst is forecasting earnings per share to rise to $3.07 in 2018, up 41 per cent from $2.17 reported in 2017, and climb to $3.26 in 2019.

Innergex Renewable Energy Inc. (INE-T)

Analyst Rupert Merer has an “outperform” recommendation and target price of $18.50. He identifies the company having an attractive growth profile driven by recently announced acquisitions and believes the company’s growing cash flow may result in future dividend increases.

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National Bank's 'Dividend All-Stars' portfolio

Materials
Chemtrade Logistics Income Fund CHE-UN-T
Energy
Enbridge Inc. ENB-T
High Arctic Energy Services Inc. HWO-T
Keyera Corp. KEY-T
Pembina Pipeline Corp. PPL-T
Financials
Fiera Capital Corp. FSZ-T
Great-West Lifeco Inc. GWO-T
Timbercreek Financial Corp. TF-T
Industrials
Ag Growth International Inc. AFN-T
Bird Construction Inc. BDT-T
CanWel Building Materials Group Ltd. CWX-T
Chorus Aviation Inc. CHR-T
Exchange Income Corp EIF-T
Telecom
BCE Inc. BCE-T
Utilities
Algonquin Power & Utilities Corp AQN-T
Brookfield Infrastructure Partners L.P. BIP-UN-T
Capital Power Corp. CPX-T
Crius Energy Trust KWH-UN-T
Innergex Renewable Energy Inc. INE-T
Pattern Energy Group PEGI-T
Real Estate
Dream Industrial Real Estate Investment Trust DIR-UN-T
H&R Real Estate Investment Trust HR-UN-T
RioCan Real Estate Investment Trust REI-UN-T
SmartCentres Real Estate Investment Trust SRU-UN-T
WPT Industrial Real Estate Investment Trust WIR.U-T

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