Wednesday, August 31, 2016

September 2016 Dividend Growth Stock Considerations

After initiating positions in Iron Mountain and Canadian Apartment Properties REIT in early August, the latter half of the month was pretty quiet as I collected dividends and received two raises from Royal Bank and Bank of Nova Scotia. During those quiet times, I thought about which companies to target in September.

Canadian Companies: 

After appearing on my August watch list and my Ten Canadian Restaurants With Growing Dividends post, four Canadian restaurants remain very interesting to me. The combination of distribution yield, distribution growth, modest price-to-earnings multiples, and same-store-sales growth at the Keg (TSE: KEG.UN), A&W (TSE: AW.UN), Pizza Pizza (TSE: PZA), and Boston Pizza (TSE: BPF.UN) are all drawing me toward investment. Even as their share prices climb toward 52-week highs, I'm considering buying a sampling of the Keg, Boston Pizza and A&W in my RRSP using some of the proceeds from my planned sale of Royal Bank (which I have been overweight for the last six months). Given that the distribution from Pizza Pizza qualifies as an eligible dividend for tax purposes, I would likely buy shares of that company in my unregistered account.

Beyond the four restaurants mentioned above, I find very few Canadian companies that interest me at their current prices. I took a deeper look at Algonquin Power & Utilities Corp (TSE: AQN) as the near 5% yield and 10% dividend growth over the past year was impressive. Equally as important, AQN would add a new sector to further diversify my portfolio. My hesitation comes from the company's high P/E multiple (~28X) and my inability to breakout their growth from maintenance CAPEX in order to determine if their payout is sustainable. I have also considered adding to some of my current holdings in my unregistered portfolio, namely Enbridge Income Fund (TSE: ENF) and Bell Canada (TSE: BCE). Lastly, after a high-level review of the Brookfield group of companies (I will share more in a future post), Brookfield Infrastructure Partners (TSE: BIP.UN) is the most interesting subsidiary. Investing in a company involved in global infrastructure projects is part of my long-term portfolio building plan.

United States Companies: 

After establishing an almost full position in Iron Mountain (NYSE: IRM) in August, I would consider closing out my position in September on share price weakness combined with prolonged strength in the Canadian dollar vs the USD.  The 4.7% dividend yield, guidance indicating double digit annual dividend growth in 2017 & 2018 with 4% growth thereafter, and reasonable price to estimated 2016 FFO =~ 16X have prompted me to consider adding to this planned long-term holding. The other US REIT I would consider adding to my RRSP in order to further provide further sector diversification is Life Storage Inc (NYSE: LSI) which was formerly Sovran Self Storage. Main reasons for this consideration are the lowest price to FFO multiple in the self-storage segment, 4% yield, and strong distribution growth.

Instead of asking which stocks interesting you heading into September 2016, I'm particularly curious if there are any Canadian dividend growth stocks you are looking at closely given their current prices? Thanks in advance for sharing your ideas.


2 comments:

  1. I have been finding it tougher and tougher to find potential Canadian dividend stocks to purchase. The KEG is a good pick, have owned it for a number of years now.

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    1. Thanks for the tip Tawcan. The Keg is definitely on my radar and I'm waiting to strike.

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