Friday, September 29, 2017

Q4 2017 Dividend Growth Watchlist

After a relatively quiet third quarter on the investment front, with only two transactions, I expect to be a bit busier during Q4.  My daughter was born on July 4th, and now that she is sleeping for longer stretches at a time, I feel more rested and ready to make capital allocation decisions. Since my investment holdings consists of my unregistered account, my TFSA, and RRSP, that will be the format in which I present my considerations.

Unregistered Account
After initiating a full position in the Canadian Imperial Bank of Commerce (TSE: CM) and an almost full position in Canadian Utilities Limited (TSE: CU) in September, I expect to complete two more purchases during Q4 in my unregistered account. I shifted my focus from Power Financial (TSE: PWF) to their parent company Power Corporation (TSE: POW) as the latter has higher dividend growth (7% vs 5%) at a slightly lower valuation. I am also interested in two monthly dividend paying companies with a history of growth, who are both out of favor with investors. Cineplex Inc (TSE: CGX) has long interested me given my love of movies and their near monopoly of movie theaters in Canada. A slow summer contributed to weak Q2 results. Although their share price has bounced off a 52-week low (up about 15%), the idea of collecting a 4.3% yield on one of my favorite Canadian companies is tempting. On the flip side, their 3.7% dividend growth is not terribly inspiring, plus I fear for their long-term relevance with technology enabling studios to by-pass the traditional movie theater distribution channel.  I am also interested in Altagas Ltd (TSE: ALA) given their share price weakness resulting from the massive WGL acquisition that was not taken positively by investors. With management forecasting near-double digit dividend increases out to 2021, backed up by growing EBITDA, this 7% yielder is near the top of my watchlist

As the cash position in my TFSA continues to grow, my plan is to increase my position in Brookfield Infrastructure Partners L.P. (TSE: BIP.UN). Brookfield management's record of dividend growth is outstanding, as is there record of accreditive acquisitions and organic growth. The fact they did a USD 1B equity raise in Q3 without materially impacting their share price is further evidence of the trust that investors place in Brookfield's excellent management team.


With a growing cash balance in my RRSP and since the Canadian dollar has risen a bit vs the US dollar, I will likely add enough shares to complete my position in Tanger Outlets (NYSE: SKT).  I continue to find the long-term risk/reward equation favorable on Tanger, selling well below its historical Price/FFO multiple. While I can understand the counter argument that online retail sales will eat into Tanger's foot traffic, sales, and margins,  I remain a fan of their outlet centers that consumers will continue to visit in order to secure bargains not available online. The only other company I'm considering adding in either my RRSP or TFSA is Choice Properties REIT (TSE: CHP.UN). Choice would allow me to gain some exposure to the grocery space in Canada since Loblaws are their top tenant, while offering an impressive yield of ~5.6% and a history of distribution growth, all at a reasonable valuation.

Which companies appear at the top of your watch list for Q417?


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  2. Thanks for sharing first at all. Based on what I saw on FASTGRAPHS, I recently bought BYD.UN at 92 and CP at 220 and intend to expect at least 10% to 15% for the next 2 to 3 years.

  3. I'd like to get more BNS, RY, Atco and CU—but only if one or more of them get hammered. Otherwise I'm just letting dividends pile up. But if BNS yields above 4.2% or CU is above 3.6% or ATCO yields 3%, for sure. Best wishes to all.

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