The year is drawing to a close and we are looking at records being broken week after week with all time market highs. November saw a surprise interest rate cut from China. On the Canadian front, OECD has called for Bank of Canada to increase the interest rates as early as May 2015. However, there have been reports that Bank of Canada might wait until the end of 2015 to start raising the rates. It is also interesting to note that the economists are calling for steady rise of rates once increased instead of a rise and pause there. But then again, most of these economists also said that we would have higher rates by now! Personally, I dont think the BoC will be rushing to raise the rates…the fall in commodities and oil market will bring some rough times for the Canadian economy and the bank will need to keep the rates down.
Outlook for December 2014
Oil and commodities seem to be the sectors under most pressure. Folks looking for value in the equity markets can easily pick up blue chip names trading at discounts in these sectors. Its a great time to build up a solid energy portfolio. The lack of moves from OPEC have sent oil prices crashing, we are not yet close to seeing the end of this trend. The strong US$ has also been a contributing factor in the drop in oil prices – which will be welcomed with open arms by energy consuming public, industries and countries; not so much from the producers.
- Qualcomm (QCOM) designs, develops, manufactures and markets digital communications products and services based on CDMA, OFDMA and other technologies. QCOM has been raising dividends for 12 years and has a 5-yr DGR of 16.95%. Qualcomm is facing some serious issues in China: the customers have outright rejected paying the licensing fee for using QCOM technology and the Chinese government has slapped the company with anti competitive behavior allegations. However, the risks are now priced into the stock and the stock looks attractive. The company is still expecting approx 10% EPS growth for the next five years.
- RioCan REIT (REI.UN.TO) – is one of the largest REITs in Canada and owns a lot of retail real estate across Canada. Although not a dividend grower (5-yr DGR 0.50%), the stock is currently undervalued and I am considering adding to my position simply because there is plenty of value to be found at these levels.
Possible new additions to my holdings
- BHP Billiton (BHP) (BBL) – is a global mining giant that discovers, acquires, develops and markets natural resources. This company has been popular amongst other dividend growth investors over the course of November and I still havent completed my research to make a call on the company. The company is a Dividend Contender having raised its dividends for 12 consecutive years with a 5-yr DGR of 10.6%.
- Enbridge (ENB) and TransCanada Corp (TRP) – are both pipeline companies based in Canada. The downturn in energy sector has affected the pieplines, although not as much as the oil majors and services sector. Both ENB and TRP have indicated that they expect the cash flow to increase over the coming years (TRP has indicated that the dividend growth will double to 8% for the next three years). However, my portfolio is already heavy in pipelines, so I have to keep my overall diversification in mind.
I am expecting dividend increase announcements from the following companies in my portfolio.
- Archer Daniels Midland (ADM) – last increase was in Dec 2013 by 26%.
- AT&T (T) – last increase was in Dec 2013 by 2.2%.
- General Electric (GE) – last increase was in Dec 2013 by 16%.
- Realty Income Corp (O) – last increase was in Sep 2014 by 0.17%.
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I deeply value reading your questions and comments.
Photo Credit: Sage_Solar