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

MARKET OUTLOOK

There may be more to come from this correction. Although the decline so far has been steep, we are only a little past the halfway point from the 20 per cent correction we saw at the end of 2018. The exponential nature of a viral outbreak makes it likely that the COVID-19 news flow will intensify over the coming weeks, but it’s important to remain rational. Influenza infects and kills many more people annually than this specific virus. Peoples’ lives will go on and the companies we own will continue to provide essential goods and services to Canadians. Regardless of how low markets end up going, I’m confident our portfolio will recover and make new highs, all the while paying significant dividends while we wait. The market action from late 2018 into 2019 serves as an important reminder of why not to sell at the bottom when there is potential for a quick recovery. The coronavirus will come and go, as will the U.S. election and many other concerns in the months and years to come. We believe in the ability of the companies we own to persevere through it all and prove their worth.

TOP PICKS

CANADIAN NATURAL RESOURCES (CNQ TSX)
Most recent purchase at $33.

Canadian Natural Resources has seen its share price decline even as the company continues to get stronger. Free cash flow guidance is impressive and the company is set to buy back twice as many shares as they did in 2019 while increasing the dividend by double digits and paying down debt. This is one of the highest-quality oil companies in the world, with a nearly 20-year track record of annual dividend increases. This company is a survivor and could thrive if we continue to make progress on egress projects for Canadian production.

TD BANK (TD TSX)
Most recent purchase at $69.

TD Bank recently reported results that were slightly weak and the shares were punished relative to RBC and CIBC, which posted strong results. In fact TD has been a middle-of-the-pack performer in the Canadian banking sector for the past five years, resulting in multiple compression (now about 10 times forward price-to-earnings) and a dividend yield of over 4.5 per cent following a dividend increase last month of about 7 per cent. Not only has TD weakened relative to its Canadian peers, but it has gone from trading at a durable premium to JPMorgan and other high-quality U.S. banks to a significant discount recently. Pretty much any way you look at it, buying TD below $70 seems to be a good long-term investment when you consider their ability to consistently grow the dividend.

ALTAGAS (ALA TSX)
Most recent purchase at $20.

I recommended AltaGas in January at $19.80. I rarely come back to Market Call and recommend a pick from my last appearance again, but that’s how much conviction we have on this company at present. The shares rallied to nearly $23 in February before the market sell-off last week gave us another opportunity to accumulate the shares at a discounted level. The quarterly earnings release was very positive and the company is guiding to an 8 to 10 per cent growth rate in their utilities business while growing their midstream business at a comparable or higher rate. The company is trading at about 25 per cent discount to its peers, so this is one of the few utility companies you can buy at a reasonable level. This is the largest position we own at Newhaven and we continue to be buyers for new clients.

PAST PICKS: FEB. 27, 2019

CANADIAN NATURAL RESOURCES (CNQ TSX)

• Then: $37.59
• Now: $33.50
• Return: -11%
• Total return: -7%

NORTHLAND POWER (NPI TSX)

• Then: $24.93
• Now: $32.20
• Return: +29%
• Total return: +35%

WESTERN FOREST PRODUCTS (WEF TSX)

• Then: $1.86
• Now: $1.12
• Return: -40%
• Total return: -34%

Total return average: -2%

WEBSITE: www.newhavenam.com