Rebecca Teltscher, Portfolio Manager, Newhaven Asset Management
Focus: Canadian dividend stocks
Top picks: Aecon, Premium Brands, Altagas
MARKET OUTLOOK:
The first quarter of 2025 has certainly been a whirlwind when it comes to stocks, the economy, trade policy and geopolitics, mostly stemming from abrupt decisions from U.S. President Donald Trump’s administration with regards to global tariffs. For Canadians, we’ve seen tariffs being imposed and then subsequently postponed twice in two months with the expiration of the second postponement ending today with no indication of what will come next.
If there is one thing that the stock market does not like, it is uncertainty. However, despite the direct and immediate economic impact tariffs will have on Canada, it is interesting to note that the U.S. stock market has underperformed the Canadian market so far this year. After two years of a highly speculative and risk-on environment in the U.S., it seems valuations are slowly coming back to reality as growth expectations get revised lower. Canada’s market was never as overvalued which explains its relatively decent performance this year.
Our portfolio, which consists mostly of defensive, stable, dividend paying stocks has performed quite well this year despite market turbulence as investors shift focus to safer investments north of the border. And most importantly, despite volatility in the markets, returns in the form of dividends are still consistent and growing, providing income stability to those that require regular cash flow.
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TOP PICKS:
Aecon (ARE TSX)
Aecon is a Canadian construction and infrastructure developer in both the private and public sector. As governments continue to spend money to stimulate growth, we expect public sector demand growth to rise. We like the defensiveness of Aecon’s underlying business segments with almost half of revenue coming from utilities & nuclear projects. Many of Aecon’s projects also provide ongoing operations and maintenance post construction offering recurring stable revenue. Following some difficulties with cost overruns from fixed price contracts during the pandemic, Aecon’s share price recovered sharply in 2024. However, many of those gains have been paired back in 2025 as the health of the economy is threatened. Despite short term stock weakness, Aecon’s backlog continues to grow making now a good entry point for new investors. Dividend yield currently 4.5 per cent with a 10-year annualized dividend growth rate of seven per cent.
Premium Brands (PBH TSX)
Premium Brands Holdings is an investment platform that acquires and invests in food-focused businesses. Two major trends impacting the food industry are food transparency and convenience. Premium brands supply many higher quality, healthier ready-to-eat options providing customers with quick and convenient food solutions for themselves and their families. After several quarters of weaker earnings and slower M&A activity, we believe the company is now at an inflection point in their growth trajectory. While the market was impatient, we appreciated management’s disciplined approach in not overpaying for acquisitions. Management has indicated that the M&A environment has drastically shifted recently with many priced acquisitions currently in the pipeline. As such, PBH announced four acquisitions in the past few months. We are also seeing transformational organic growth ahead as PBH is in the final stages of a huge capacity buildout in the U.S. in order facilitate cross-country production for large customers such as Costco. The stock recently suffered as tariffs threatened the entire consumer space, however, Premium Brands has a less than five per cent exposure to cross-border trade with recent U.S. acquisitions further alleviating any tariff exposure.
Altagas (ALA TSX)
Altagas is often ignored or misunderstood by the market due to its hybrid midstream/utility business. However, as long-term investors, we appreciate the stability of the utility business combined with the strong growth prospects of the midstream business. Altagas continues to execute on its growth projects including the Ridley Island Export Facility which will increase Altagas’ ability to export liquified propane to Asian markets. At a time when tariffs and trade wars are topical, gas producers are increasingly interested in diversifying and lessening their reliance on the U.S. for gas exports. With regards to their utility operations, primarily located in Washington DC, Maryland and Virginia, rate base growth is expected to achieve eight per cent as the demand for power continues to rise. Despite the stock recently achieving new highs, we believe Altagas is still reasonably priced given its outsized growth prospects, dividend yield of 3.3 per cent, and annual dividend growth of six per cent.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ARE TSX | Y | Y | Y |
| PBH TSX | Y | Y | Y |
| ALA TSX | Y | Y | Y |
PAST PICKS: February 5, 2024
CAE (CAE TSX)
- Then: $26.45
- Now: $35.18
- Return: 33%
- Total Return: 33%
Emera (EMA TSX)
- Then: $47.67
- Now: $60.78
- Return: 28%
- Total Return: 34%
Brookfield Infrastructure Partners (BIP.UN TSX)
- Then: $42.03
- Now: $42.94
- Return: 2%
- Total Return: 9%
Total Return Average: 25%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CAE TSX | Y | Y | Y |
| EMA TSX | Y | Y | Y |
| BIP.UN TSX | Y | Y | Y |
