The U.S. and Canadian stock markets have declined about 8% and 9%, respectively, from their 52-week highs. They’re spooked out from the Halloween month!
Let’s take a step back and be objective. The U.S. market is still about 29% higher than three years ago. The Canadian market? About 12% higher. From five years ago, the U.S. market is 52% higher and the Canadian market is 15% higher.
SPY data by YCharts. The 10-year price action of SPY and TSX:XIU
You get the big picture. The stock markets go up over the long term. Historically, it has always been money-making opportunities to buy quality companies on dips. And this dip is no different if you find great businesses to be attractively priced.
Here are some North American dividend-growth stocks that I find compelling today.
Undervalued Healthcare Stock
AbbVie (NYSE:ABBV) offers a safe 4.7%. Its payout ratio of less than 50% is sustainable.
Since AbbVie was spun off from Abbott Labs (NYSE:ABT) in 2013, it has increased its dividend every year thereafter. Its four-year dividend growth rate is 13.2%. Its trailing 12-month dividend per share is 40% higher than the previous 12 months.
The spooked market has brought AbbVie back into undervalued territory. At less than US$82 per share, it trades at a blended P/E of about 11. Analysts estimate the company will grow its earnings per share by at least 12% per year for the next three to five years. Read More
- Boeing outperforms its peers and the market in multiple periods.
- Boeing has a strong backlog of seven years-plus based on current production capacity.
- Applications of new technologies throughout Boeing’s business will allow for margin expansion to the mid-teens by 2020 and further expansion beyond that.
- The stock has been in consolidation mode year to date. So, it’s a good time to dig further into the company to see if it fits your portfolio.
Aerospace and defense stocks have finally taken a breather and are in consolidation. As I was reviewing a potential dividend-growth stock to buy from the group, I noticed that Boeing (NYSE:BA) has outperformed its peers, including Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD), and Raytheon (NYSE:RTN) and the market in different periods, including the year-to-date, one-year, three-year, five-year, and 10-year periods.
A Business Overview
Boeing is the world’s biggest aerospace company. It’s also the leading manufacturer of commercial airplanes and defense, space and security systems and a key provider of government and commercial aerospace services.
Boeing supports airlines and the U.S. and allied government customers in 150-plus countries. Last year, its global services segment made up about 15.6% of revenue. Year to date, this segment grew 11%, which will help stabilize its overall business performance as this business is non cyclical, unlike the commercial aerospace industry.
- AltaGas is revisiting its 52-week (and seven-year) low.
- The company now offers a 9.6% dividend yield.
- Is the dividend safe?
AltaGas (TSX:ALA) used a mix of debt and essentially stock for the ~CAD$9 billion WGL Holdings acquisition. The debt included a ~US$4.95 billion bridge facility. It also raised capital from the markets by selling CAD$2.6 billion of subscription receipts in Q1 2017.
The acquisition took about a year and four months to finally close in July 2018. In the process, the company had to pay interest on the debt and high dividend-equivalent payments for the receipts, which were converted to common shares when the acquisition closed.
For example, in 2017, AltaGas incurred CAD$170 million of interest expense, which was 12.6% higher than the interest expense of CAD$151 million in 2016 largely due to the financing costs of roughly CAD$19 million associated with the bridge facility.
In 2017, AltaGas paid about CAD$147.84 million of dividend-equivalent payments for the subscription receipts. In comparison, it declared ~CAD$362 million of common stock dividends and ~CAD$59 million of preferred dividends.