Tweet

Canadian Income Stocks!

Written by: Sean Hyman

Article Overview: Investors who buy high yield stocks now could collect big dividends while the economy fights to get back on its feet.

Canadian Income Stocks!

18 High-Dividend Canadian Stocks

The 2008 financial crisis uncannily echoes what happened in Japan more than a decade ago. In the 1990s, the Japanese banking systems had become overloaded with bad loans after a property bubble collapse, according to Gillian Tett, author of Fool's Gold. The investor psychology seemed dangerously similar too. If this is the case, investors who buy high yield stocks now could collect big dividends while the economy fights to get back on its feet.

The Associated Press (AP) reported on Friday that the U.S. federal budget deficit has surged to an all-time high of $1.42 trillion. The Obama administration projects deficits will total $9.1 trillion over the next decade. For weeks the US dollar's decline sent gold to all-time highs and helped oil to over $78. Canada happens to have plenty of these commodities.

The following are 18 Canadian companies listed on U.S. exchanges with market caps greater than $1 billion, reasonable P/E ratios, and dividend yields greater than 3.5% (sorted by yield):

Name Symbol P/E Yield Market Cap

PROVIDENT ENERGY TR (PVX) 9.0 11.1% 1.66B

PENGROWTH EGY UTS (PGH) 5.0 10.6% 2.61B

PENN WEST ENERGY TRU (PWE) 5.1 10.1% 6.90B

ENERPLUS RES FD (ERF) 5.8 8.4% 3.97B

HARVEST ENERGY TRUST (HTE) 4.2 8.1% 1.14B

B C E INC (BCE) 21.7 6.1% 18.82B

TELUS CORP (TU) 8.6 5.8% 9.41B

PRECISION DRILL TRST (PDS) 4.3 5.7% 1.91B

BANK OF MONTREAL (BMO) 17.3 5.1% 27.68B

TRANSALTA CORP (TAC) 21.9 5.1% 4.07B

BAYTEX ENERGY TR UTS (BTE) 12.8 5.0% 2.77B

CANADIAN IMP BK COMM (CM) 3.7 5.0% 2.98B

BROOKFIELD PTYS CP (BPO) 6.2 4.6% 4.47B

TRANSCANADA CORP (TRP) 15.1 4.3% 21.71B

SHAW COMM CL B NV (SJR) 15.6 4.2% 8.24B

ROGERS COMMUN CL B (RCI) 16.8 4.0% 16.57B

BANK OF NOVA SCOTIA (BNS) 16.7 3.9% 45.86B

TORONTO DOMINION (TD) 17.4 3.5% 53.70B

These 18 high-dividend companies are in 4 sectors: Energy, Financial, Telecom and Utilities.

Energy Income Trust

High demand from China and a weak US dollar make the energy sector attractive. 7 companies belong to energy income trust category:

Symbol Operating Margin Debt/Operating CF 52-wk Range

(BTE) 36% 1.0 7.84 - 26.44

(ERF) 51% 0.7 12.85 - 28.58

(HTE) 10% 3.2 3.00 - 11.55

(PDS) 28% 2.0 2.00 - 12.21

(PGH) 22% 2.5 4.51 - 11.90

(PVX) 23% 1.5 2.23 - 6.84

(PWE) 58% 2.3 6.77 - 19.01

These income trusts, like REITs, are required to pay out a large portion of their earnings as dividends. In 2011, after they convert from income trust into corporations, they most likely will still be high-dividend players. 52-week-price-range data shows these income trusts are very volatile. Their recent runs could be slowed or reversed if the US dollar shows strength.

For sophisticated traders, trading commodities directly might provide a higher reward. For income investors, commodity companies might be a better choice because they provide some buffer, in addition to regular dividends.

There is a small ETF called Claymore Canadian Energy Income (ENY) which includes most of these companies. Its yield is 5.45%.

Financials

The Following are comparisons between Canadian banks, U.S. major banks averages, as well as JPMorgan Chase (JPM), one of the most conservative banks in the US. Clearly Canadian banks are much more profitable.

Description P/E ROE % Div. Yield % Net Profit Margin %

U.S. Money Center Banks n/a 1.1% 1.1% 1.3%

JPMorgan Chase & Co. (JPM) 52.6 2.9% 0.4% 15.5%

Toronto-Dominion Bank (TD) 17.6 9.4% 3.5% 22.2%

The Bank Of Nova Scotia (BNS) 16.8 13.2% 3.9% 28.9%

CIBC (CM) 3.8 7.0% 5.0% 18.8%

Bank of Montreal (BMO) 17.4 9.2% 5.1% 21.8%

Telecom

Competition in the telecom sector is heating up in Canada. When BCE (BCE) and Telus (TU) announced they will start carrying the iPhone next month which puts an end to the exclusivity that Rogers (RCI) has enjoyed, it sent RCI's short ratio to a stunning high of 33. Unlike those 3, Shaw Communications (SJR) primarily focuses on cable services.

Utilities

TransAlta (TAC) is an electric utility company while TransCanada (TRP) operates through two segments: pipelines and energy. TAC's short ratio of 5.8 makes me nervous.

Conclusion

After boldly buying when others were selling, Warren Buffet is pulling back, buying fewer stocks while investing in debt. He is warning that the economy, though on the mend, remains deeply troubled.

In addition, the Canadian dollar is a strong threat to the Canadian economy. CurrencyShares Canadian Dollar Trust (FXC) appreciated over 13% this year. Mark Carney, the governor of the Bank of Canada, has warned that the Canadian dollar appears to be moving away from the fundamentals.

The iShares MSCI Canada Index (EWC) year-to-date's return is an astonishing 46%. A great stock can be easily turned into a bad investment, if you buy it at a higher than reasonable price. It all depends on the starting price.

Nonetheless, high-dividend, fundamentally-strong companies are more likely to survive in this stormy market. One of the greatest ways to protect your portfolio is through asset allocation: to make sure not a single sector accounts for more than 20% of your portfolio. Be sure to re-balance as it will automatically enroll you into the "buy low, sell high" camp.

Disclosure: I have long positions on BMO, BNS, CM, PWE, TD, and TRE. All data is from Yahoo Finance as of Oct 16, 2009.

Stocks: BCE, BMO, BNS, BPO, BTE, CM, ENY, ERF, EWC, FXC, THE, JPM, PDS,

PGH, PVX, PWE, RCI, SJR, TAC, TD, TRP, TU

Related Articles
  DIVIDEND PAYING STOCKS THE WAY TO GO!
  Shares
  7 Reasons why Canada’s dollar will continue to Pounce on the U.S. Dollar!
  Earn Daily Interest While in this Currency Investment
  How Much Money can You Invest and When to Sell Your Stocks

Article Tags: all time highs, bank of nova scotia, baytex energy, bubble collapse, dividend yields, federal budget deficit, gillian tett, harvest energy trust, high dividend, high yield stocks, investor psychology, precision drill, provident energy, rogers commun, shaw comm, telus corp, toronto dominion td, transalta corp, transcanada corp, west energy



Related Forum Posts
$1,000,000 - Hi Evan, Are you talking about US Dollars? If so, that would be approx £500,000 in the UK. The Canadian Dollars differs also from the Australian Dollar. In any case, one needs to solve problems to help people to get money. The more solutions are given to people's needs to solve their problems, the closer one gets. Finally, are we talking about 'Income' or can we talk about 'Asset'? Kindest Regards Beat "Unlock People's Potentials!"
Canadian Entrepreneurs...let's chat.... - I thought it would be nice to gather up all the Canadian entrepreneurs on one topic to discuss how everyone is getting along. I just realized Evan is Canadian as well! Hope he's able to join the conversation. Look forward to the chat. By the way, I'm in BC. Phil
Re: What are your success criteria? - [quote="DwayneGarrett":1igrdgib]Out of curiousity, what has to be present for you to know that your business is a success? The top three things for me are: 1. Maintaining a 6 figure income year in and year out. 2. Creating and promoting my own products. 3. Income not solely dependent upon my personal effort. How about yours?[/quote:1igrdgib] I would have to say mine were: 1. Monthly Residual Income that exceeds all expenses by 110% 2. Free time to create and promote my own products (relies on #1) 3. 5% of all revenues generated by my team going to feed starving kids Now that is "feel good work".
Re: Meltdown in the Financial Markets - [quote="Kevin":3lnvm7h2]If the US is simply creating fake/"funny" money with their bailout, then I wonder why the Canadian dollar has dropped so badly? One Canadian dollar is suddenly worth only about $0.84 US now. It doesn't make sense to me.[/quote:3lnvm7h2] The Canadian dollar has dropped to about $0.80 USD... what kind of holiday shopping season will it be this year if this trend continues?
Canadian Entrepreneurs - Hi Evan, I think you should profile Anita from the Body Shop. Is she Canadian? It would be nice to get a Canadian perspective for all of us who are starting businesses in Canada. Do you find th stories of the entrepreneurs vary depending on country? Thanks for all these great stories - it helps inspire us! Jessica


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Four Secrets to Earning Income as an Author

Winning Market Share in a Tough Economy

Promoting your company and self with verve

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.