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National Bank this week released an update to its 2022 Dividend All-Stars portfolio. For the second half of the year, the portfolio was trimmed to 20 securities with the addition of a REIT and removal of two securities.

Each security in the Dividend All-Stars portfolio must meet three investment criteria: 1) minimum yield of approximately 4 per cent; 2) high probability of sustainable or rising dividends; and 3) an overall positive outlook for the company and/or the security price.

The Dividend All-Stars portfolio has a strong performance track record relative to the TSX Index. For seven of the past 10 years, the portfolio has reported a total return that exceeded the Index. During the first half of this year, the Dividend All-Stars portfolio delivered a total return, including the yield, of 0.2 per cent outperforming the S&P/TSX Composite Index, which declined 5.2 per cent.

Addition

Halifax-based Killam Apartment REIT (KMP-UN-T) was added to the All-Stars portfolio.

Analyst Matt Kornack has an “outperform” recommendation on Killam with a target price of $20.50. He argues, “Over the past two years, Killam has been a net beneficiary of a rise in interprovincial migration, particularly owing to the prevalence of work from home, which drove demand for affordable housing in Killam’s core-Atlantic province portfolio. That said, the REIT has also been active in property development which will further support its strong growth profile, especially given the high level of completions set to come online in H2/22 [second half of 2022].”

Mr. Kornack anticipates funds from operations (FFO) per unit will expand to $1.11, up from $1.07 reported in 2021, and increase to $1.16 in 2023. His adjusted funds from operations (AFFO) per unit estimates are 93 cents for 2022, up from 89 cents reported in 2021, and 97 cents in 2023.

The REIT pays its unitholders a monthly distribution of 5.833 cents per unit or 70 cents per unit yearly, equating to a current annualized yield of 4.1 per cent.

Subtractions

European Residential REIT (ERE-UN-T) was removed from the portfolio. “Deteriorated near-to-medium term outlook in the EU” was the rationale for the deletion.

Lundin Mining (LUN-T) was the other security that was removed. Last month, National Bank analyst Shane Nagle trimmed his target price on Lundin to $9 from $9.50 while maintaining his “sector perform” recommendation. He stated in a research note, “Lundin is well situated to weather a prolonged period of depressed copper prices; however, elevated cash costs and the potential development of Josemaria adds significant financial uncertainty and deteriorates near-term FCF [free cash flow] generation.” In April, Lundin Mining completed the acquisition of Josemaria Resources Inc.

Listed in the table below are the 20 securities in the Dividend All-Stars portfolio.

SecurityTickerYield
1Alaris Equity Partners Income TrustAD-UN-T7.6%
2Algonquin Power & Utilities Corp.AQN-T5.0%
3Allied Properties REITAP-UN-T5.4%
4AltaGas Ltd. ALA-T3.6%
5BCE Inc.BCE-T5.6%
6Capital Power Corp. CPX-T4.6%
7Choice Properties REITCHP-UN-T5.2%
8CIBCCM-T5.0%
9CT REITCRT-UN-T5.1%
10Dexterra GroupDXT-T5.8%
11Dream Industrial REITDIR-UN-T5.7%
12DRI Healthcare TrustDHT-UN-T4.5%
13Enbridge Inc. ENB-T6.1%
14IGM Financial Inc. IGM-T6.0%
15Keyera Corp. KEY-T6.1%
16Killam Apartment REITKMP-UN-T4.1%
17KP Tissue Inc.KPT-T6.8%
18Mullen Group Ltd.MTL-T5.0%
19Topaz Energy Corp.TPZ-T5.4%
20Transcontinental Inc. TCL-A-T5.5%

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