Investing

Investing Idea - Dividend Growth

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  • Feb 14th, 2021 7:55 pm
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Feb 26, 2017
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BigDurian wrote: Which would you add to between CPX and FTS? I already have EMA and CU, but would like to add one more. I saw today in the G&M that EMA was the only stock on the TSX they listed as being in oversold territory this week (RSI of 26).
I think it depends on why your buying it and what you're goals are.

My view is that CPX has a higher potential return but its riskier. Its basically all power generation and has some risk based on electricity pricing. It does have 25% of its revenue from renewables which I don't think they're getting enough credit for. It also has coal which is being converted to NG and is mostly Alberta which is a negative due to the poor growth although they're diversifying. They have one more year they've given guidance to raise the dividend 7% and after it will likely be a bit lower.

FTS is very safe and has something like 93% of its revenues which are fee based transmission and distribution. It looks like it can provide around a 10% return based on the current price and estimates which are based on their capital backlog. I think they have 3 or 4 more years where they given guidance to 7% dividend growth.
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With FTN re-establishing its dividends is it worthwhile to get in?
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Oct 16, 2008
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kuznagi wrote: With FTN re-establishing its dividends is it worthwhile to get in?
Curious to find this out myself as I held a sizeable position pre-covid which dropped quite a bit. The news of them extending the period of their fund for another 5 years and and reinstating dividends seem bullish to me. However, these types of instruments are tricky as they often seem to payout more than they can really sustain. Their strategy basically uses a cover call position (Long Financial Stocks, Short Call), to pay out dividends by selling the call options. This strategy only works well when financials do well, but given the recent recovery of the financial sector, I'm curious why the stock price hasn't risen more - perhaps they are too much in the hole from covid?
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hellohello wrote: Rod,

Any thoughts on Real Matters (real.to)
Not familiar with them, but it seems to be a growth stock worth researching it. At a glance, it appears fairly valued now considering how earnings and cash flow are estimated to grow in the next 2 years - but it will be largely driven how well they execute this.

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Rod
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Pho6 wrote: Curious to find this out myself as I held a sizeable position pre-covid which dropped quite a bit. The news of them extending the period of their fund for another 5 years and and reinstating dividends seem bullish to me. However, these types of instruments are tricky as they often seem to payout more than they can really sustain. Their strategy basically uses a cover call position (Long Financial Stocks, Short Call), to pay out dividends by selling the call options. This strategy only works well when financials do well, but given the recent recovery of the financial sector, I'm curious why the stock price hasn't risen more - perhaps they are too much in the hole from covid?
Out of interest, I took at look at how a mutual fund company holding a handful of Canadian and US banks can pay 15% in dividends annually when the average dividend paid by the holdings is probably 4%. It is lot of ask of banks to provide double digit annual in capital appreciation. They seem to be active in selling shares every year, presumably to fund the ongoing operations (new shareholders pay existing shareholder dividends). Anyway, the company issued 2.6 million class A shares at $9.80 and same number of preferred shares at $10.15 with closing on January 14. Don't expect the share value to be much different than this share offering price for the next little while.

It seems like the company has a 5 year renewable life span which is pretty risky. If the company ceases operation, return of capital would leave the class A shareholders with a pretty big divot. The current book value per share is $5.05. Over the years, it hovers up to as much as $6-7. This might be a reasonable risk if the shares sold at close to book value.
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treva84 wrote: @Chance7652 what do you think of IFC?
Looks pretty good from Fastgraphs and I like how its been a good investment over the last 10 years (12% IRR).

I don't own any of the insurance companies but also just took a look at the Life and Health ones (I'm guessing Covid is a concern for them). IAG, SLF and MFC also looked pretty good. IAG and MFC out of those look like the best picks based on historical valuations.
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Dec 26, 2019
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@rodbarc If you have a couple of minutes, could you help me understand why AQN and CPX didn’t make it to your 2021 Watchlist? What metric(s) ultimately knocked them out?

Thank you in advance
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Do any of you guys hold SPY or VOO in your portfolio?
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Dec 21, 2010
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faken wrote: Do any of you guys hold SPY or VOO in your portfolio?
I have VOO, good ETF with low MER ... I'm wondering if I should dump if TESLA moves down hard.
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Jul 24, 2017
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Hi Rod,

What do you think about Alimentation Couche-Tard (ATD.B) after the last couple days drop?

Thank you
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May 12, 2012
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Hey everyone

I was wondering if I should be removing Suncor from my portfolio. I expanded my exposure over last year when the stock kept dropping. The company has been able to shed costs in order to counteract their heavy losses experienced throughout the year. The company is quite diversified, being involved in many aspects of the industry from extraction to refinement. I feel the company still looks healthy, although, they are still very volatile due to reliance on oil demand and oil prices, so they will most likely recover, but not for some time. My main concern is that I feel I am losing out on other opportunities in the market with having funds tied up in the stock, especially with the dividend cut (it is still respectable, just makes the ticker lose a bit of appeal). I will be trimming back a bit as part of my bi-annual rebalancing bringing my exposure closer to 2.5% of my portfoilio, but I was wondering if I should remove my position entirely and maybe add exposure at a later date.

Cheers!
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Dec 16, 2018
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Ferny111 wrote: Hey everyone

I was wondering if I should be removing Suncor from my portfolio. I expanded my exposure over last year when the stock kept dropping. The company has been able to shed costs in order to counteract their heavy losses experienced throughout the year. The company is quite diversified, being involved in many aspects of the industry from extraction to refinement. I feel the company still looks healthy, although, they are still very volatile due to reliance on oil demand and oil prices, so they will most likely recover, but not for some time. My main concern is that I feel I am losing out on other opportunities in the market with having funds tied up in the stock, especially with the dividend cut (it is still respectable, just makes the ticker lose a bit of appeal). I will be trimming back a bit as part of my bi-annual rebalancing bringing my exposure closer to 2.5% of my portfoilio, but I was wondering if I should remove my position entirely and maybe add exposure at a later date.

Cheers!
Its completely your call.
Once travel resumes then oil will be in demand (Increases from current state and takes time to reach 2019 peaks). Don't you think that will be a tailwind for SU?

Things I might consider are,
Are you able to deploy the amount to other stocks that fit your criteria?
Do you think those investments will give more return than holding SU?
Or are you looking to sell and hold cash for better entry opportunities (buy back SU or other equities)?

If either of them is 'Yes', I would sell.
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reversi wrote: @rodbarc If you have a couple of minutes, could you help me understand why AQN and CPX didn’t make it to your 2021 Watchlist? What metric(s) ultimately knocked them out?

Thank you in advance
When considering new businesses I typically look over a long period to understand how the business did compared to peers and taking into account if it's during a recession period. Most of utilities companies that I already have had a good operating performance after the 2001 recession, then got barely affected by the 2008 recession, and now we're seeing how they are doing on the current recession. Looking at the operating performance after 2001 recession, AQN had operating cashflow lower or too close to dividends, which doesn't align with my quality criteria regarding sustainability of dividends. Then it was cut in 2008 recession. It has since been improving on a steady pace, but I still want to evaluate how it will perform on the next recession - which is where we are now. Although cash flow is expected to be impacted (like peers), it's operating at much healthier levels, so it might be considered next year.

Operating cash flow for AQN:

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Comparison with operating cash flow for ACO.X:

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Comparison with operating cash flow for CU:

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Comparison with operating cash flow for EMA:

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Comparison with best in class in this sector, FTS:

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Regarding CPX, I chose NPI instead, as it had a longer history regarding operating results, a higher market cap and a better credit rating. I would like to see an improved credit rating on CPX before considering it to be part of my portfolio.

Operating cash flow for CPX:

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Operating cash flow for NPI:

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Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

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Dec 26, 2019
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@rodbarc Thank you.

I also want to thank you for everything you do for this forum. I starting reading this forum in 2016 and have learned a lot about DGI with all of your analysis and conversations here. It gave the confidence to start investing heavily in 2017, and had the confidence in 2020 to take some significant risks (leverage to buy DGI stocks), which is going to be life-changing for me down the road.

In certain there are tons of people who silently read your analysis.
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Feb 26, 2017
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Thanks for your analysis on utilties @rodbarc . I'm very bullish on utilities in the long term and own about half of these names.

For discussion, I'd like to run this by you for CU. I've been quite disappointed in CU since buying it in 2017 and their recent 1% dividend raise adds to that. I've traded in and out of it but it looks like my IRR has been around 5-6%. CU looks like a great buy from FFO but in looking at the earnings its 0.77% yearly growth over the last 10 years. Its a current hold for me with a 1/2 position but the thesis of why I bought it (yield + dividend growth) is almost broken. The 1% dividend raise also shows a company struggling to grow and I don't like how they dropped from 10% raises to 1% in 3 years. My question is how do you weigh looking at FFO vs PE for CU and utilities in general?

As for AQN I think part of the reason for the dividend cut was the conversion from an income trust. I own a 3x position in AQN but think they're overvalued now and wouldn't buy them currently. I look at them on fastgraphs from their US listing as they're about 95% US revenues which looks slightly better. Agreed that CPX is more risky as its all power generation and they have price risk. I'm thinking they may trade at higher multiple in the future as they're about 25% renewables. I'm suspecting renewables will be a big focus for their growth strategy and think people will start to look at the company more positively as this happens and also when they get completely out of coal.
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Canada, Eh!!
Was looking at replacing FTS [presently slight loss] with AQN but in Rod I believe so will keep FTS :)
.......
July 13, 2017 to October 25, 2018: BOC raised rates 5 times and MCAP raised its prime rate next day each time.

2020: BOC dropped rates 3 times and MCAP waited and waited to drop its prime rate to include all 3 drops.
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georvu wrote: Was looking at replacing FTS [presently slight loss] with AQN but in Rod I believe so will keep FTS :)
Start trading cryptocurrencies to be a true disciple. :)

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