Ryan Bushell, president and portfolio manager, Newhaven Asset Management
FOCUS: Canadian dividend stocks
Top Picks: Freehold Royalties, Altagas, Pembina
MARKET OUTLOOK:
With all the news of tariffs this week it’s hard to think bigger picture, but that is what we must do as long-term investors for our clients’ benefit. Our view on recent developments is that it will be detrimental to both sides to have a trade war between Canada and the U.S., the two most integrated sovereign economies in the world, and as such we are unlikely to see tariffs have a lasting negative impact. That said, this episode should serve as a wake-up call to the Canadian electorate as we consider our go-forward options as a country, especially as it relates to energy exports.
In terms of our portfolios we are staying the course, critical infrastructure will outlast Trump and his successors and will most definitely outlast these tariffs. More interesting to us is that Nvidia keeps making new lows post the DeepSeek news from last week. Given the outsized influence of U.S. technology stocks on market performance and how key artificial intelligence (AI) development is to all of those stories, it remains a story that is worth watching.
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TOP PICKS:
Freehold Royalties (FRU TSX)
Freehold Royalties has over 60 per cent of its cash flow coming from the U.S. following a slew of acquisitions over the past five years and as such they are relatively better insulated from any tariff impacts. With a well-covered 8.6 per cent dividend yield, a depressed valuation and insulation from trade issues, Freehold should attract some attention over the next 12 months and beyond.
Altagas (ALA TSX)
Altagas remains a top five holding for our clients based on its predictable cash flows and growth trajectory in both their midstream and utility businesses. With the recent drop in the Canadian dollar during its most profitable quarters of the year we expect very solid quarterly results over the next two reporting periods, combined with an upcoming catalyst for their balance sheet when they are able to divest of its minority stake in the Mountain Valley Pipeline. A dividend growth rate of five per cent plus is sustainable for the foreseeable future and the company was recently returned into the TSX Dividend Aristocrats Index. With Altagas you get a nice combination of safety/insulation and growth at present.
Pembina Pipeline (PPL TSX)
Pembina has performed quite poorly since November on very little news flow. While the market is intently focused on tariff related impacts, LNG Canada continues to ramp and these developments make more export projects likely in the coming years including Pembina’s own Cedar LNG. As the largest processer of Canadian natural gas with an integrated export business under development, Pembina is well positioned for the next decade and beyond of Canadian resource development opportunities and you collect a 5.3 per cent dividend yield while you wait.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| FRU TSX | Y | Y | Y |
| ALA TSX | Y | Y | Y |
| PPL TSX | Y | Y | Y |
PAST PICKS: January 10, 2024
Manulife Financial (MFC TSX)
- Then: $28.93
- Now: $42.75
- Return: 48%
- Total Return: 54%
Arc Resources (ARX TSX)Then: $20.54
- Now: $25.26
- Return: 23%
- Total Return: 27%
Northland Power (NPI TSX)Then: $25.16
- Now: $16.34
- Return: -35%
- Total Return: -31%
Total Return Average: 17%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MFC TSX | Y | Y | Y |
| ARX TSX | Y | Y | Y |
| NPI TSX | Y | Y | Y |
