Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The quantitative strategy team at Scotiabank asked the company’s analysts across the world for top equity income ideas for what has been a difficult environment for dividend stocks,
“Both U.S. and Canadian dividend strategies are performing poorly this year, for the most part underperforming their respective equity benchmarks. The steep rise in interest rates and bond yields has eroded the competitiveness of dividend-paying stocks … Over the long run, dividends matter a lot, accounting for the lion’s share of equity returns. As such, we highlight Scotiabank GBM’s top equity income ideas, asking our team to provide stocks that meet the following criteria - Stocks that boast a competitive dividend yield, given the elevated interest rate environment; not necessarily a stock with a dividend yield higher than bond yields, but one with a dividend yield greater than 3.0 per cent. Conviction that the dividend per share could be bumped next year (or at least sustained), and where the dividend per share increase is supported by fundamentals (i.e., where earnings per share/free cash flow growth is strong enough)”
The Canadian stocks on the list are Brookfield Asset Management, Canadian Natural Resources, DRI Healthcare Trust, Endeavour Mining, Exchange Income Corp., Granite REIT, Labrador Iron Ore Royalty Corp., Manulife Financial Corp., Maple Leaf Foods, Northland Power, Parkland Corp., Power Corp. of Canada, Russel Metals Inc., TC Energy Corp., Telus Corp., and Topaz Energy Corp. The international names are Aguas Andinas, Ambev SA, Banco do Brasil, Brixmor Property Group, Enterprise Products Partners LP, Kimberley-Clark de Mexico, Neoenergia SA, Terrafina, TIM SA, UDR Inc., Vale, Walmex and WEC Energy Group Inc.
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BofA Securities commodity and derivative strategist Francisco Blanch raised his short term forecast for the oil price but leaves the 2024 expectations alone,
“The recent run up in refining margins is helping push Brent crude oil prices higher, together with deep production cuts from Saudi and Russia. With OPEC+ committed to curbing oil supply into year-end and China stimulus poised to expand into 4Q23, we expect global oil stocks to decline by 70mn over the coming 3 months. As such, we now see Brent averaging $91 per barrel in 2H23, up from $81/bbl prior. Still, we keep our $90/bbl forecast for 2024 as non-OPEC oil supply expands by 1.2 million barrels per day driven by Guyana, Canada, US shale and Brazil. Also, if Venezuela and Iran sanctions were to ease further, that could add add 450k b/d to supply in 2024. Incremental volumes could help cap a further rise in oil prices, should OPEC+ politics and global geopolitics allow. Plus, positioning measured by CFTC data or our own CTA [commodity trading advisor funds] models suggests speculators are quite long oil already”
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BMO economist Erik Johnson is tracking North American electric vehicle sales,
“U.S. EV sales are on pace to reach nearly 9 per cent of new vehicle sales this year and will surpass one million units sold for the first time in a year (includes plug-in hybrids). Across the states, California leads the pack at 24 per cent. Improved incentives from the Inflation Reduction Act are helping to spark EV sales south of the border. The price gap between electric and traditional vehicles has fallen to just over $5,000, reducing one of the key barriers to adoption. It’s no mystery this is adding fuel to the ongoing UAW strike, as electric vehicle assembly uses up to 30 per cent less labour than traditional platforms. Meantime, Canadian EV sales remain stuck at 8.6 per cent through the first half of the year. That’s a sizeable stepdown from 9.6 per cent in 2022Q4. While sales are up 26.7 per cent year-to-date, rising non-EV volumes have diluted their share. Across the provinces, sales in BC (16.5 per cent) and Ontario (6.1 per cent) have underperformed, which reinforces that heightened household debt loads are shifting sales to cheaper segments” .
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Diversion: ‘So Much for ‘Learn to Code’ – The Atlantic