Canadian Income Investing Opportunities for 2013    Bookmark and Share

Published Mon,13 Jan 2013 11:00 CET by TopYields.nl

Over the past ten years, the Canadian stock market has outperformed the U.S. stock market by 100%, according to David Rosenberg, chief economist at Glushkin Sheff & Associates Inc. While the Canadian market's returns lagged the broad U.S. equity indices last year, they are expected to outperform this year. Some analysts forecast that the S&P/TSX will grow slightly more than 7% in 2013, whereas the S&P 500 index will gain 4.6%, based on the average 2013 year-end target of nine equity strategists including, inter alia, analysts at Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, and UBS. The Canadian market could see more upside potential this year and in the longer-term, if the commodities demand and prices rebound, boosting the performance of Canadian resource companies. With this in mind, investors should consider opportunities for income investing in Canada.

The fundamentally strong Canadian economy is likely to provide support to stronger Canadian equity performance over the long haul. The Canadian economy appears to be on a firmer macroeconomic footing for a sustained economic prosperity than the U.S. economy. According to David Rosenberg, “Canada has an unemployment rate that is two percentage points lower, and an industry operating rate (CAPU) that is two percentage points higher than is the case in the U.S., and yet inflation, both total and core, is about a full percentage point lower.” The Canadian economy has benefited from an appreciating currency that is providing the impetus for building the productive private capital stock, which, in the long-term, will drive the economy's competitiveness and productivity. In contrast, the U.S. economy is driven by consumption and housing. In addition, the resource-rich Canadian economy is well positioned to benefit from the long-term global population growth and the booming resource use driven by emerging market growth. All this bodes well for Canada's corporate profitability and performance.

There are many ways to invest for income in Canada so as to attempt to capitalize on the nation's prospects. Some income investors prefer holding equities of companies that have proven earnings power and consistent dividend growth. These investors should evaluate the S&P/TSX Canadian Dividend Aristocrats index constituents or exchange-traded products designed to track this index, such as Canada-listed iShares S&P/TSX Canadian Dividend Aristocrats Index Fund (TSX: CDZ). The index and fund constituents are stocks of well-established Canadian companies that have increased their dividends for at least five consecutive years.

Canadian Income Investing Opportunities 2013

There are other investment instruments providing exposure to the Canadian dividend stocks. A relatively new ETF that gives exposure to Canada's top dividend stocks is the First Asset Morningstar Canada Dividend Target 30 Index ETF (TSX: DXM). This fund invests in 30 largest and most liquid Canadian public issuers selected according to a proprietary methodology of Morningstar, a fund research company. Morningstar's fundamentally-based selection criteria focus on a combination of attributes such as expected dividend yield, cash flow to debt, 5-year normal EPS growth, return on equity, and 3-month EPS estimate revision. The fund provides a pool of 30 dividend stocks from across industries and sectors.

The holdings of both funds can be good starting points for identifying Canada's best dividend stocks. The table below provides a glance at the main dividend characteristics of the constituents of the Morningstar Canada Dividend Target 30 Index and the noted Fund. Some of the featured companies are known as dividend growers, such as Rogers Communications (TSX: RCIb)(NYSE: RCI) and Shaw Communications (TSX: SJRb)(NYSE: SJR). Several other companies, such as Iamgold (TSX: IMG)(NYSE: IAG) and Shoppers Drug Mart (TSX: SC)(OTC: SHDMF.PK) have the capacity to boost their dividends considerably. The few banks comprising the index and the fund, such as Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM), Royal Bank of Canada (TSX: RY)(NYSE: RY), Bank of Nova Scotia (TSX: BNS)(NYSE: BNS), and Bank of Montreal (TSX: BMO)(NYSE: BMO), are well known for their solid balance sheets and comparatively high dividend yields. It should be noted that one company, Poseidon Concepts (TSX: PSN)(OTC: POOSF) has suspended its dividend and will likely be removed from the index.

Stock symbol(s): BMO,BMO.TO,BNS,BNS.TO,BTE.TO,BTE,CDUAF,CM,CM.TO,CU.TO,IAG,IGIFF,IGM.TO,MG.TO,MGA,PBA,PMG.TO,PMGLF,POOSF,PPL.TO,PSN.TO,...



Stock name                      ISIN Last trade   P/E EPS Div PS Ex Div Date Payout Ratio Div Yield  
BAYTEX ENERGY TRUST
P/E ratio of BAYTEX ENERGY TRUST on Google Finance
CA0731761098 31.71   22.8 141.0 2.28 Sep 26 2014 2 7.19
TRANSALTA
P/E ratio of TRANSALTA on Google Finance
CA89346D1078 11.02   0.0 -0.3 0.72 Aug 27 2014 -256 6.53
TRANSALTA
P/E ratio of TRANSALTA on Google Finance
CA89346D1078 9.82   0.0 -0.2 0.59 Aug 27 2014 -236 6.01
IGM FINANCIAL
P/E ratio of IGM FINANCIAL on Google Finance
CA4495861060 43.46   14.3 3.1 2.15 Sep 26 2014 70 4.95
IGM FINANCIAL
P/E ratio of IGM FINANCIAL on Google Finance
CA4495861060 38.94   14.3 2.7 1.72 Sep 26 2014 63 4.42
CAN. IMP. BANK OF COMMERCE
P/E ratio of CAN. IMP. BANK OF COMMERCE on Google Finance
CA1360691010 100.66   12.7 7.9 4.00 Sep 25 2014 51 3.97
THOMSON REUTERS
P/E ratio of THOMSON REUTERS on Google Finance
CA8849031056 41.49   66.6 0.6 1.62 Aug 19 2014 266 3.90
BANK OF NOVA SCOTIA
P/E ratio of BANK OF NOVA SCOTIA on Google Finance
CA0641491075 67.99   11.6 5.9 2.64 Oct 03 2014 45 3.88
ROGERS COMMUNICATIONS
P/E ratio of ROGERS COMMUNICATIONS on Google Finance
CA7751092007 38.48   14.8 2.6 1.49 Sep 10 2014 58 3.87
BANK OF MONTREAL
P/E ratio of BANK OF MONTREAL on Google Finance
CA0636711016 81.51   12.6 6.4 3.12 Jul 30 2014 48 3.83
ROYAL BANK OF CANADA
P/E ratio of ROYAL BANK OF CANADA on Google Finance
CA7800871021 79.28   13.6 5.8 3.00 Oct 23 2014 52 3.78
PEMBINA PIPELINE
P/E ratio of PEMBINA PIPELINE on Google Finance
CA7063271034 47.38   39.5 1.2 1.74 Oct 22 2014 147 3.67
CANADIAN IMPERIAL BANK OF COMMERCE
P/E ratio of CANADIAN IMPERIAL BANK OF COMMERCE on Google Finance
CA1360691010 89.55   12.7 7.0 3.21 Sep 25 2014 46 3.58
THOMSON REUTERS
P/E ratio of THOMSON REUTERS on Google Finance
CA8849031056 36.95   66.6 0.5 1.32 Aug 19 2014 243 3.57
SHAW COMMUNICATIONS
P/E ratio of SHAW COMMUNICATIONS on Google Finance
CA82028K2002 24.89   16.5 1.5 0.87 Oct 10 2014 58 3.50
BANK OF NOVA SCOTIA
P/E ratio of BANK OF NOVA SCOTIA on Google Finance
CA0641491075 60.57   11.5 522.0 2.09 Oct 03 2014 0 3.45
BANK OF MONTREAL
P/E ratio of BANK OF MONTREAL on Google Finance
CA0636711016 72.55   12.6 574.0 2.48 Jul 30 2014 0 3.42
ROYAL BANK OF CANADA
P/E ratio of ROYAL BANK OF CANADA on Google Finance
CA7800871021 70.62   13.6 519.0 2.38 Oct 23 2014 0 3.37
PEMBINA PIPELINE
P/E ratio of PEMBINA PIPELINE on Google Finance
CA7063271034 42.14   0.0 0.0 1.38 Oct 22 2014 3.27
CANADIAN UTILITIES
P/E ratio of CANADIAN UTILITIES on Google Finance
CA1367178326 40.16   18.6 2.1 1.07 Aug 07 2014 50 2.66
MAGNA INT.
P/E ratio of MAGNA INT. on Google Finance
CA5592224011 108.38   12.6 8.4 1.85 Aug 27 2014 22 1.71
SAPUTO
P/E ratio of SAPUTO on Google Finance
CA8029121057 31.68   23.0 1.4 0.52 Sep 02 2014 38 1.64
MAGNA INTERNATIONAL
P/E ratio of MAGNA INTERNATIONAL on Google Finance
CA5592224011 96.54   12.6 7.5 1.52 Aug 27 2014 20 1.57
IAMGOLD
P/E ratio of IAMGOLD on Google Finance
CA4509131088 2.35   0.0 -2.2 0.00 Jul 01 2013 0 0.00


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