Ryan Bushell, president and portfolio manager at Newhaven Asset Management
Focus: Canadian dividend stocks

MARKET OUTLOOK

Markets broadly appear poised for a pause after a significant rally over the last year. Equities have steadfastly discounted a diminished pandemic impact since the initial vaccine trials were released in November of 2020. Despite two more devastating waves of COVID-19, the market has rarely faltered and now we’re left to wonder what type of environment we should be discounting for the next six to 12 months. Rarely have we seen such polarized debate on the go-forward outlook for the economy, inflation and market performance. Provided vaccines remain effective, it is likely that durable goods demand cools off while stimulus is gradually withdrawn. This should lead to a slower-growth, lower-inflation environment relative to what we’re seeing now, which could be a negative catalyst for equities more broadly. We remain positive on oil and gas due to rebounding demand and constrained supply as well as utilities and renewables on a long-term basis. We would express caution on most other areas of the market at present given the ambiguous outlook for growth, absent additional government stimulus.

TOP PICKS

Manulife Financial (MFC TSX)
$24.50

We continue to like the direction Manulife is headed and anticipate a reorganization of its U.S. business that should be a catalyst for its shares. In the meantime, we collect an outsized 4.6 per cent dividend yield while we wait and have exposure to a core business that is performing adequately.

Shaw Communications (SJR/B TSX)
$36

Quite simply, we expect Shaw’s deal with Rogers to close at $43, which represents a total return of over 20 per cent from current levels. Canadian telecom regulation has turned more favourable over the past year, while there are precedents supporting the transaction in both Canada (BCE with Manitoba Telecom) and the U.S. (Sprint and T-Mobile). Additionally, Shaw declined to participate in the most recent 3,500 MHz spectrum auction and Rogers is prepared to significantly divest Shaw’s wireless assets. All of these factors support an eventual approval of the merger.

Algonquin Power & Utilities (AQN TSX)
$18.75

Recent equity issuance has been frustrating as has company performance. At the same time, Algonquin is incredibly well positioned for the future given their hybrid utility/renewable power model. I am a believer that this is an ideal setup for a company to harvest regulated cash flow and redeploy it into a portfolio of renewable projects. In the meantime we collect a consistently growing dividend that currently equates to a 4.5 per cent yield.

PAST PICKS: JUNE 5, 2020

Manulife Financial (MFC TSX)

• Then: $19.52
• Now: $24.28
• Return: 24%
• Total Return: 31%

Savaria Corporation (SIS TSX)

• Then: $13.66
• Now: $19.64
• Return: 44%
• Total Return: 48%

TC Energy (TRP TSX)

• Then: $63.19
• Now: $62.96
• Return: 0%
• Total Return: 6%

Total Return Average: 28%