On Tuesday, National Bank released an update to its 2023 Dividend All-Stars portfolio.
For the second half of the year, the portfolio was expanded to 19 securities with the addition of four securities and removal of a trust.
Each security in the Dividend All-Stars portfolio must meet three investment criteria: 1) minimum yield of approximately 5 per cent; 2) high probability of sustainable or rising dividends; and 3) an overall positive outlook for the company and/or the security price.
National Bank introduced its Dividend All-Stars portfolio on Feb. 13. For the six-month period between Feb. 10 and Aug. 18, the portfolio outperformed the S&P/TSX Composite Index with a total return (including the yield) of 0.7 per cent compared to a 2.1-per-cent loss for the TSX.
Here are the changes made to the portfolio.
Additions
Brookfield Renewable Partners L.P. (BEP-UN-T)
Analyst Rupert Merer has an “outperform” recommendation on BEP with a target price of US$34.
Mr. Merer forecasts FFO (funds from operations) per unit will rise to $1.71 in 2023, up from $1.56 in 2022, and expand to $1.89 in 2024 driven by both acquisition and organic growth.
“On its Q2 [second quarter] conference call, management highlighted that M&A [merger and acquisition] conditions are tilting towards a buyer’s market, which could create opportunities for BEP to buy operating assets or look at public-to-private transactions, but limit its pace of asset sell-downs in the back half of the year,” he said.
“For the year, BEP expects to commission [approximately] 5 GW [gigawatts] of new capacity which should contribute [roughly] $70 million per year to FFO. In Q2, BEP highlighted an additional [roughly] 19 GW of capacity in its advanced stage pipeline that, combined with its sustainable solutions pipeline could add another $245 million in run-rate FFO.”
Chemtrade Logistics Income Fund (CHE-UN-T)
Analyst Endri Leno has an “outperform” recommendation and target price of $12.50, implying the unit price may rally 50 per cent.
The analyst highlighted five attractive characteristics for the Fund: “1) exposure to stable end markets that reduces economic cyclicality; 2) tailwinds from the U.S. repatriation of advanced semi-conductor chip manufacturing; 3) an elevated distributable cash yield; 4) a healthy and well-covered monthly distribution; and 5) an inexpensive valuation.”
The analyst’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) forecasts are $450.5-million in 2023, up from $430.9-million in 2022, retreating to $420 million in 2024.
Gibson Energy Inc. (GEI-T)
Analyst Patrick Kenny has an ‘outperform’ recommendation and $26 target price.
He highlighted the company’s steady cash flow, saying: “For 2024, we forecast Gibson’s cash flows to be [approximately] 70 per cent underpinned by long-term take-or-pay contracts.”
On Aug. 1, the company completed the acquisition of South Texas Gateway Terminal.
“The acquisition offers 8.6 mmbbls [million barrels] of crude oil terminalling capacity and two deep-water docks with permitted export capacity of 1.0 mmbpd [million barrels per day], with further future growth potential through optimization of existing capacity and terminal expansions,” said Mr. Kenny.
The stock has a high yield. Gibson pays its shareholders a quarterly dividend of 39 cents per share or $1.56 per share yearly, equating to a current annualized yield of 8 per cent. The analyst forecasts the adjusted payout ratio will be 60 per cent in 2023.
Northland Power Inc. (NPI-T)
Mr. Merer has an “outperform” recommendation and $35 target price.
The stock has had a rough year with the share price plunging from the mid-$40′s to the mid-20′s over the past 12 months. However, the analyst suggests “growth tailwinds are coming.”
“At Hai Long, additional amendments were made to extend the CPPA [Corporate Purchase Power Agreement] to 30 years (was 22) and the long stop dates on key supplier contracts,” he said. “At Baltic Power, all supply contracts have been signed. Banking groups have been finalized for both projects, and NPI expects both to reach financial close by year-end.” In the second quarter, the analyst noted that the company, “commissioned its 130 MW [megawatts] La Lucha solar project, which should add $6 million in EBITDA this year…In South Korea, NPI was awarded EBLs [Electricity Business Licenses] for up to 1.3 GW at Dado and 0.6 GW at Bobae. In New York, NPI should bring on 220 MW of wind in H2E [expected in the second half of the year] and close its High Bridge sale in Q3E [expected in the third quarter].”
The analyst is forecasting adjusted EBITDA of $1.224-mbillion in 2023, down from $1.398-billion in 2023, and $1.,259-billion in 2024.
Deletion
DRI Healthcare Trust (DHT-UN-T)
The Trust was removed from the portfolio. Given the strong rally in the unit price year-to-date, the yield has fallen to 3 per cent, which is below the 5-per-cent minimum yield requirement for this portfolio.
Listed in the table below are the 19 securities in the Dividend All-Stars portfolio.