Canadian Fund Leaders

Best Canadian Funds Over the Past Decade
The Globe & Mail published an article over the weekend analyzing all Canadian Equity Funds with a 10-year track record. Not surprisingly, several prominent Dividend Funds came out on top.
 
 

 
 
Renaissance Millennium High Income Fund came in first place with a 10-year annualized return of 10.8% (after fees) compared to 4.7% for the TSX. This fund invests in income trusts and dividend-paying stocks. "Royal Bank of Canada, Toronto-Dominion Bank, Enbridge and Northland Power Income Fund are securities that have been in the fund since the start", said Barry Morrison, portfolio manager since the fund's inception in 1997.

Allied Properties

Allied Properties REIT (AP.un) focuses on Class "I" (brick and beam) office properties. Allied has a portfolio of more than 5.9 million square feet primarily in downtown Toronto, with a growing presence in Montreal and to a lesser extent in Winnipeg, Quebec City and Kitchener.

With the bulk of its portfolio situated just east and west of the downtown Toronto core, Allied offers its tenants unique brick and beam office space. Allied's niche focus differentiates it from more traditional office landlords. Class I office space appeals to service-oriented businesses, independent professionals and partnerships who are attracted by desirable locations close to the financial core, lower rental rates and distinctive physical characteristics. Most of the office buildings in Allied's portfolio also have highly sought after street front retail (especially in trendy neighbourhoods such as King West).

The REIT has a conservative balance sheet, a strong interest coverage ratio, and a low payout ratio relative to its peers. Allied’s low cost of capital in combination with high cap rates available in Class I properties makes for highly accretive acquisition opportunities.

Allied is not on most investors radar screens. This is primarily due to the fact that the REIT has a small market cap (~$800 million) and is not a member of either the S&P/TSX Composite Index or the REIT Index. It is only a matter of time before more investors discover this hidden gem amongst the Canadian REITs.

Brookfield Real Estate Services

Another Brookfield Hidden Gem

Brookfield Real Estate Services (BRE.un) is one of Canada's largest residential real estate franchisors with 14,631 agents / sales reps, and a 22% share of the Canadian market. BRES operates nationally under the Royal LePage brand, in Quebec under the La Capitale brand, and in high-end neighbourhoods in and around Toronto under the Johnston & Daniel banner.

Brookfield Asset Management

Brookfield shows growth potential
By Dianne Maley, Globe and Mail

The Source: Rossa O'Reilly, CIBC World Markets
The Idea: Buy Brookfield Asset Management (BAM.A)

Over the past 10 years, Brookfield Asset Management shares have swung from a discount to a premium of net asset value and back again, depending on the economic cycle and investors' view of where real estate prices were headed. The company has controlling interests in publicly traded Brookfield Properties.

In 2007, when things were booming, the shares soared to a 34% premium just about the time net asset value peaked at $40 (U.S.) a share, Mr. O'Reilly noted in an interview. They plunged to a discount of 38% early in 2009, when net asset value (NAV) tumbled to $20 a share.

They now trade at about a 10% discount to Mr. O'Reilly's estimated NAV of $26 a share.

Bank Roundup

All of Canada's big six banks reported solid Q1 numbers, handily beating analyst expectations.

• Royal Bank profit rises 35% to $1.5 billion
• TD's profit doubles to $1.3 billion
• Scotiabank profit climbs 17% to $988 million
• BMO posts $657 million profit
• CIBC's profit jumps to $652 million
• National Bank profit triples to $215 million

No dividend increases to report.

CML Faces Headwinds

CML Healthcare (CLC.un) hit a new 52 week low on Friday as a wave of panic selling drove investors to the exits.

CML's fourth quarter was weaker than expected. The company reported lower profit margins driven primarily by problems from CML's U.S. division. While CML runs a lean lab in Canada, its U.S. acquisitions have been a blemish on an otherwise solid success story. During the quarter, CML took a $50 million write down on its U.S. division. CML is struggling to collect payments from their U.S. customers. Healthcare reform is another risk factor for CML's U.S. business.

An inevitable distribution cut to the $0.80 - $0.85 range (currently $1.07)  will put further downward pressure on CML.

CML should face a challenging 2010, but for investors with a long-term view, CML is trading at an attractive valuation.

SNC-Lavalin Hikes Dividend

Montreal-based engineering firm SNC-Lavalin (SNC) is raising their dividend following a solid increase to its profits last year. SNC hiked their quarterly dividend by 13% to $0.17 per share. SNC has been consistently raising their dividend year after year.

Pembina Conversion

Pembina Pipeline (PIF.un) announced that it plans to convert from an income trust to a corporation on July 1, 2010. Pembina plans to maintain their current monthly payout through to 2013. Cash distributions will be paid as a dividend following completion of the conversion and are expected to be eligible for the dividend tax credit for Canadian investors that hold Pembina in a non-registered account.

CNQ Raises Dividend

Canadian Natural Resources (CNQ) is raising its quarterly payout by 43%. CNQ is saying the move recognizes the stability of its cash flow. The Calgary-based oil and gas producer's quarterly dividend will be increased to $0.15 per share. Based on the new rate, CNQ still yields below 1%.

February Recap

Here's a recap of some prominent TSX-listed companies that raised their dividends during February.

• Tim Hortons: 30% increase
• Rogers: 10% increase
• Intact Financial: 6% increase
• Shoppers Drug Mart: 5% increase
• TransCanada: 5% increase
• Thomson Reuters: 4% increase 
• Brookfield Renewable Power: 4% increase 
• Emera: 4% increase

Some other notable mentions outside of Canada:

• Nestle: 14% increase
• Abbott Labs: 10% increase
• Coca-Cola: 7% increase
• GlaxoSmithKline: 6% increase 
• Diageo: 5% increase
• Home Depot: 5% increase

January Recap