Friday, October 7, 2016

Three Recent Buys - AW.UN, LSI and EMA

After reading about some of my fellow dividend bloggers taking money off the table, rethinking their choice of a dividend growth strategy, and waiting for better valuations...I went on a bit of a shopping spree over the past week. Don't get me wrong, I respect everyone's decisions to take a breather or try something different, but I'm sticking with what works for me: buying dividend growth stocks at fair valuations.

Buy 1 - A&W Revenue Royalties Income Fund (TSE: AW.UN)

After high-lighting A&W as one of the three Canadian restaurants with growing dividends that interested me the most and including it in my last couple monthly watch lists, I re-deployed the proceeds of my Royal Bank stock sale from inside my RRSP to this tasty royalty vehicle. With a 4.6% yield, 10% distribution growth over the last year, and some of the strongest same-store-sales growth of any Canadian restaurant, I was very attracted to this security. The fact I am also a big fan of their marketing, use of higher quality ingredients, and products (especially their onion rings) further pushed me toward this purchase. I'm not sure that this will be my last Canadian restaurant investment (see the final paragraph), but I'm happy to make it my first.

Buy 2 - Life Storage Inc. (NYSE: LSI)

My plan for my RRSP is to add US-traded REITs in sectors that are unavailable in Canada in order to provide further diversification within my investment holdings. Since there's this great sale on REITs lately, probably due to an expected US interest rate hike before the end of 2016, and valuations are becoming very attractive. I decided to initiate a position in self-storage company LSI as the company's revenue, FFO, and distribution growth over the past five years have all been impressive. The fact I was able to pick up my shares at a P/FFO valuation of about 16X enticed me to pull the trigger. I'm unsure if this will be the last US REIT I add to my RRSP before the end of the year, as WP Carey is becoming increasingly interesting due to their elevated international real estate exposure, relatively high yield (over 6%), and cheaper valuation relative to their peers.

Buy 3 - Emera Inc. (TSE: EMA)

Despite including it on my list of five Canadian utilities with growing dividends, Emera never jumped out at me until I looked at them recently and noticed their P/E had fallen below 15X. That relatively cheap historical valuation, combined with their 4.5% yield, 10% recent dividend hike, and management guidance of dividend growth of 8% through 2020 quickly bumped this company to the top of my mind. I used some spare funds in my non-registered account to initiate a position in this company on a recent dip, and I will likely add more before the end of the year.

Given my commitment to be honest with my readers, there was actually a fourth buy that I would have liked to include in the above list...but I sold it after 3 hours. Although I have cut back on short-term trading in recent quarters, on September the 30th, I picked up some shares in the Keg Restaurant (TSE: KEG.UN) at a great price, but then decided to sell after they rose to the point where I was able to collect a profit equal to six months worth of distributions. My thinking was that I would likely have a chance to repurchase the Keg units at some point over the next six months at a better price. At least that's my hope.

What companies are on your watch list this October?


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