Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Hugo Ste-Marie believes dividend hikes will be a pleasant surprise for investors in 2022,
“With the release of their Q3 results, several TSX companies bumped their dividend sharply (SU +100%, IAG +29%, LNR +25%, SLF +18%, and count on banks, which start reporting this week). We have seen a similar situation in the United States, where EOG recently bumped its dividend by +82%, DVN +59%, AFL +21%, V +17%, EL +13%, and DRI +12% … Capital return to shareholders has started to pick up in pace, but our report explains why we think there is more to come over the next couple of years … Consensus is looking for Financials to grow their dividends by 6% in 2022 and 2023, which we think will be comfortably exceeded (DPS were already growing 7% to 10% per year from 2010 to 2019) … Given the recent acceleration in oil prices, we believe the sector will generate more than enough free cash flow to surpass the modest dividend hikes currently expected for 2022 (+8%) and 2023 (+5%) … We believe lumber and base metal stocks are in good shape to return capital to shareholders… On the other side, gold and precious metal producers could be less inclined to return vast sums of money to shareholders.”
The report also included a number of related analyst stock ideas.
For telecom and media, Telus Corp., and BCE Inc. are favoured.
Linamar Corp. and Stelco Holdings Inc. are highlighted in industrials, Tourmaline Oil Corp. and Imperial Oil Ltd. in energy, and National Bank and BMO have the most room for dividend hikes according to the analyst.
“Scotia: Dividend increases will be better than expected in 2022″ – (research excerpt) Twitter
Citi global economist David Lubin published his year ahead forecasts,
“If we are right … two important conclusions follow. The first is that global economic activity will become less trade-intensive than it has been in recent months. Second, inflation expectations should moderate overall as supply-chains become less stressed by overwhelming demand pressures. That doesn’t mean inflation is nothing to worry about, but we think that true inflation concerns are probably something for the future, driven by the search for ‘supply chain resilience’, the necessary but expensive effort to decarbonize, and the risk of fiscal dominance. Near term, the bigger global concern we think could be China, where there is a risk of a deeper, longer slowdown than the world will welcome”
“Citi expects inflation pressures to ease in 2022″ – (research excerpt) Twitter
RBC REIT analyst Pammi Bir recapped performance for the sector and provided top picks for 2022,
“Q3/21 FFOPU [funds from operations per unit] increased 5% YoY for our coverage universe, ahead of our 3% estimate, but below the 10% growth in Q2/21 which lapped the sector’s low water mark last year. Among reporting entities in our universe, 68% (23 of 34) delivered earnings that were in line with our forecasts, consistent with the long-term average (65%). In contrast, 24% (8 of 34) exceeded our expectations, while 9% (3 of 34) were short. Acknowledging that sample sets within subsectors are in some cases limited, diversified had the highest proportion of entities that exceeded our forecasts, while seniors housing had the largest proportion that were short … Our Outperform-rated REITs include Allied Properties, Boardwalk, BSR, CAPREIT, Dream Industrial, European Residential, First Capital, Granite, InterRent, Killam Apartment, Minto Apartment, and SmartCentres. Also on our roster of Outperform-rated securities is Chartwell Retirement Residences.”
“RBC top picks in REITS” – (research excerpt) Twitter
Diversion: “Your political views are not your own” – Marginal Revolution
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