Ryan Bushell's Top Picks: Nov. 4, 2020

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

MARKET OUTLOOK

Clearly a disputed outcome to the election and continued rapid escalation of COVID-19 cases resulting in renewed widespread lockdowns are worst-case scenarios for markets in the near term and thus we need to brace ourselves for another bout of significant volatility. In the medium term, the picture starts to look brighter as another round of coordinated stimulus, a potential vaccine rollout and the eventual seasonal ebb in COVID-19 come into focus in early 2021. The question will be how bad things get between now and then, but regardless of the outcome, I think my clients are well served owning an infrastructure-focused portfolio that provides a consistent and growing dividend income stream.

TOP PICKS

TC Energy (TRP TSX) – Most recent purchase $52

TC Energy shares are approaching five year lows despite a consistently increasing dividend over that time frame. Clearly, the prospect of a Biden win permanently stopping Keystone XL is weighing on the shares, however Keystone XL is a red herring at this point. TC energy has the most robust natural gas infrastructure footprint in North America and natural gas has a long future as part of our energy mix. TC’s shares are trading at just over 10 times 2021 EPS and a 6 per cent dividend yield.

CAE Inc. (CAE TSX) – Most Recent purchase $19

CAE is a new holding for me in an effort to capitalize on the post pandemic world. CAE’s shares have dropped 50 per cent year-to-date and they suspended their dividend for obvious reasons. Going forward they can weather this storm as pilots need to log simulator hours even if they aren’t flying and defence and cargo flights remain near pre-pandemic levels. A significant increase in private travel seems assured while a pilot training bubble on the back of the pandemic seems equally likely, which should lead to CAE shares (and the dividend) recovering lost ground and then some. I have purchased a partial position for now and will buy more if the shares retrace into the teens again this winter.

Fortis Inc. (FTS TSX) – Most recent purchase $53

Fortis remains my favourite long-term holding for all clients with a nearly 50-year track record of annual dividend increases. Savvy acquisitions in the middle od the last decade with an elevated Canadian dollar have positioned the company with an enviable footprint of regulated utilities all over North America. I believe the next leg of growth will come from a wave of infrastructure spending directed towards clean power generation and distribution where Fortis will be able to capitalize. This most recent bout of weakness may be our last opportunity to buy the shares under $55.

PAST PICKS: NOV. 18, 2019

TD Bank (TD TSX)

• Then: $76.72
• Now: $59.67
• Return: -22%
• Total Return: -18%

Inter Pipeline (IPL TSX)

• Then: $22.22
• Now: $12.28
• Return: -45%
• Total Return: -40%

NFI Group (NFI TSX)

• Then: $27.57
• Now: $15.97
• Return: -42%
• Total Return: -38%

Total Return Average: -32%