Friday, January 5, 2018

Q1 2018 Dividend Growth Watch List

Before I even had a chance yesterday to post my Q1 2018 watch list, I conducted my first transaction of 2018, adding to my Brookfield Infrastructure Partners position in my TFSA. Although I don't have any immediate plans to buy or sell shares, I still wanted to share my watch list. 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

This quarter, the theme of my watch list seems to be “utilities”. At current prices, I’m open to adding to my two utility holdings of Canadian Utilties (TSX: CU) and Emera (TSX: EMA). Both of these companies are reasonably priced, have attractive current dividend yields, and have a history of annually dividend increases (46 and 11 years respectively). For similar reasons, when I start to look at companies outside of my holdings, I gravitate towards Fortis (TSE: FTS) and Algonquin Power (TSX: AQN).  I’d consider initiating positions in these two companies since I feel both provide something slightly different than my current holdings. In the case of Fortis, it’s the extensive exposure to 11 states in the US. Exposure to the utility markets in New York, Illinois and Arizona are particularly attractive to me as I see these three states as having largely inelastic and growing demand for power. For Algonquin, it’s the company’s clean energy assets that I’d like to add to my portfolio. Additionally, the company offers investors the option to receive dividends in either US dollars or Canadian dollars, which I also find attractive.


I wrote the below paragraph before adding to my position in Brookfield Infrastructure Partners (TSX: BIP.UN) on January 4, 2018. 

My utilities theme extends to my plan to increase my holding of Brookfield Infrastructure Partners. Despite the nearly annual dilutive share offerings in order to finance their growing backlog, I continue to have faith in Brookfield’s excellent management team to effectively manage their utility, transport, energy, and communication infrastructure assets. The company’s recently announced $1.3B sale of an aging Chilean utility investment to a Chinese buyer might mean less or no dilution through share offerings in 2018. Exposure to a worldwide set of infrastructure assets that generate steady amounts of rising income continues to be desirable for me.


Although my plan is to let dividends accumulate and add them to my annual RRSP contribution in Q2 2018 to purchase more shares of Digital Realty Trust (NYSE: DLR), there’s one position I might add to in the next three months. With A&W Income Fund (TSE: AW.UN) announcing the addition of 35 net new restaurants to their royalty pool for 2018, it could be an opportune time to add to this position before increased royalties from the new restaurants flow through to A&W’s financial results.

Which companies appear at the top of your watch list for Q1 2018?


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