Ryan Bushell, president and portfolio manager, Newhaven Asset Management
FOCUS: Canadian dividend stocks
Top Picks: Pembina Pipeline, Arc Resources, K-Bro Linen
MARKET OUTLOOK:
Newhaven portfolios have performed admirably so far this year and are benefitting from the rotation away from richly-valued technology shares recently. Our thesis of power demand growth in North America is gaining steam in the mainstream and we are seeing some of our favoured natural gas infrastructure names outperform so far this year as the market is beginning to realize the implications for gas demand going forward. We continue to be cautious on the consumer and are hopeful we can purchase some quality consumer names to round out our portfolio if/when we see more downside there. Dividend growth marches along as more than 50 per cent of our holdings have increased their payouts so far this year, adding to our confidence for the years ahead.
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TOP PICKS:
Pembina Pipeline (PPL TSX)
Though Pembina’s share price is up more than 15 per cent so far this year we think the company is extremely well positioned. The recent purchase of the remaining stake in Aux Sable from Enbridge combined with the final investment decision reached on Cedar LNG are clear growth opportunities for the company. When combined with the prospect of additional volumes through its existing infrastructure network and a solid balance sheet there are not many better positioned companies than Pembina for the next decade plus. Investors also collect a growing dividend with a 5.22 per cent yield while waiting.
Arc Resources (ARX TSX)
Commodity prices have been weak recently which has caused Arc Resources to retreat more than 10 per cent from the highs earlier this year. We believe investors are not properly discounting the growth in contracted volumes Arc will bring on over the next few years, or the improvement in commodity prices that is likely once export capacity comes online. In the meantime, we collect a three per cent dividend yield with a massive share buyback in a company that makes an excellent acquisition target given the depth of their inventory position in Western Canada.
K-Bro Linen (KBL TSX)
Recently there has been a rash of takeovers of small to medium-sized Canadian businesses with solid underlying fundamentals. K-Bro fits this description and flies well under the radar given their conservative nature and limited analyst coverage. Make no mistake we would not like to see this business taken away from us, the management team is excellent and the company has a steady path of growth ahead of it. Following a couple of years of labour inflation and energy price dislocation in the UK we feel the shares are undervalued and attractive on a long-term basis.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PPL TSX | Y | Y | Y |
| ARX TSX | Y | Y | Y |
| KBL TSX | Y | Y | Y |
PAST PICKS: JULY 18, 2023
TC Energy (TRP TSX)
- Then: $50.54
- Now: $58.31
- Return:15%
- Total Return: 24%
NFI Group (NFI TSX)
- Then: $11.22
- Now: $166.70
- Return:49%
- Total Return: 49%
Emera (EMA TSX)
- Then: $53.75
- Now: $48.84
- Return:-9%
- Total Return: -4%
Total Return Average: 23%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TRP TSX | Y | Y | Y |
| NFI TSX | Y | Y | Y |
| EMA TSX | Y | Y | Y |
