Tag Archives: TSX:TRP

Canadian Dividend Stocks I Bought in the Last Three Months

In the last three months, it would have cost Canadians 28% to 34% more to convert Canadian dollars to U.S. dollars. Today, it costs around 30% more still. That’s why in the past three months, I bought Canadian dividend stocks instead of U.S. dividend stocks. Specifically, I bought shares in these Canadian dividend stocks that are still priced at a good value today.

Canadian Dividend Stocks for a Solid Portfolio: Banks

The big five Canadian banks are known for their solid performance in the last recession. During the financial crisis, they managed to keep a strong position, and maintained their dividends.

In the last three months, I managed to buy some shares in two of the big five Canadian banks, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). They’re the second and third largest banks in Canada.

Toronto-Dominion Bank hadividendss a meaningful presence in the United States. In 2014, 21% of its earnings were from the U.S.

Whenever it reaches a 4% yield or higher, it’s a good buy. Today, Toronto-Dominion Bank costs $53 per share with a 3.9% yield.

Based on a historical normal multiple of 12.6, the shares should trade  closer to $58. So, the bank shares are slightly undervalued with roughly an 8% discount.

Bank of Nova Scotia is an international bank with operations in North America, Latin America, the Caribbean and Central America, and parts of Asia. Around $60 today, it yields 4.6%. Typically, when it yields 4.5% or higher, it’s a good buy. Based on a historical normal multiple of 12.4, it should trade closer to $70. So, the bank shares has a margin of safety of over 14%.

Today, Bank of Nova Scotia stands out from the two because it is cheaper and has a higher yield.
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Canadian Energy Stocks to Buy Now

After the oil price plummet, you may be looking to invest in the top Canadian energy stocks. Thinking of Suncor Energy Inc. (TSX:SU)(NYSE:SU), Enbridge Inc (TSX:ENB)(NYSE:ENB), or Inter Pipeline Ltd (TSX:IPL)? Well, among these, other common integrated oil & gas companies and midstream companies will be discussed.

Integrated oil & gas companies and the pipelines are the safer energy companies. Canadian energy stocks such as Suncor Energy Inc. (TSX:SU)(NYSE:SU) are integrated oil & gas that are involved with upstream and downstream operations. Because their businesses are multifaceted, their businesses are more stable than energy companies involved only in upstream businesses. Upstream operations include oil & gas exploration and production, while downstream operations include refinement, marketing, and distribution of the commodities.

The pipeline businesses generate stable cash flows by transporting and storing energy. Their services are mostly fee-based so their profitability are less affected by the oil price.

I put together a list of Canadian energy stocks that are integrated oil & gas companies or pipeline companies. They all turn out to be dividend stocks which help with portfolio returns because shareholders receive income even in a down market.


However, integrated oil & gas company dividends may not be reliable because the company profitability is based on the commodity prices. As we’ve seen in the past year, some energy companies had to slash their dividends. Cenovus Energy Inc (TSX:CVE)(NYSE:CVE) was one of them.

For the data analysis, I compared the energy stocks’ trailing twelve month (TTM) earnings per share (EPS) and operating cash flows from 2014’s. I’m also comparing the latest quarter’s debt-to-equity (D/E) to 2014’s. I will also include the D/E ratio. The above is checking the stocks’ profitability and debt levels in this low oil price environment.

The integrated oil and gas stock list includes Suncor Energy, Imperial Oil Limited (TSX:IMO)(NYSE:IMO), Husky Energy Inc. (TSX:HSE), and Cenovus Energy.

The oil and gas midstream list includes Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Pembina Pipeline Corp (TSX:PPL)(NYSE:PBA), Inter Pipeline Ltd (TSX:IPL), and Keyera Corp (TSX:KEY).

Without further ado, let’s explore the integrated oil & gas Canadian energy stocks to see which one you should buy.

Which Integrated Oil and Gas Company Should You Buy?

Referring to Table 1 further down the page, Suncor Energy’s D/E increased 7% while its operating cash flow dropped by only 15%. Compared to its peers, it’s doing quite well. At the same time, its operating margin remains the highest among its peers.

It’s more reassuring to hold Suncor shares because it has a track record of increasing dividends. It has hiked dividends for 13 consecutive years. Further digging, and it turns out Suncor Energy is keeping operating cost low.In the first half of 2015, its operating cost per barrel was only $28.20. The oil price has remained above that, so that’s how the company remains profitable in this low oil price environment. Suncor Energy’s 5-year compounded annual growth rate for its dividend is over 20%, although its most recent dividend increase was only 3.6% to reflect the impact of the low oil price.

Imperial Oil is also a possible Canadian energy stock to buy as it maintains a relatively high operating margin of 10.5%. Coincidentally, that percentage is close to its 2009 low levels of 10.3%. Imperial Oil has impressively increased dividends for 20 years, although its dividend growth rate has been around 6% per year. Even though it only yields 1.3%, after a pullback of over 23% from its 52-week high, it could still be a decent investment. Investors can view Imperial Oil as a very conservative energy stock. It is awarded the highest S&P credit rating of AAA.

The operating margins of both Husky and Cenovus has dropped to below 4%. Particularly, Cenovus’ D/E is much higher than the others. Cenovus slashed its dividend in September 2015 by 40%. It probably did it to maintain a strong balance sheet, but it was bad news to income investors.

So, if I were to buy only one integrated oil and gas company, I would probably go with Suncor Energy, although Imperial Oil is not a bad choice if you’re a conservative investor.

Winner: Suncor Energy (or Imperial Oil for the more conservative investors)

Integrated Oil and Gas Stocks: Profitability and Debt Comparison

Company 1Market Cap 1Yield S&P Credit Ratings 2EPS change 2Op CFL change 2TTM Op Margin 3D/E Change 4D/E
Suncor $49.2B 3.4% A- -47.8% -15% 13.1% +6.7% 0.32
Imperial Oil $35.6B 1.3% AAA -43.1% -32.4% 10.5% +18.2% 0.26
Husky $20.9B 5.7% BBB+ -76.7% -12.8% 1.7% +22.7% 0.27
Cenovus $17B 3.1% BBB+ -186.7% -27.1% 3.5% -1.9% 0.53

Table 1: Integrated Oil and Gas Stocks Profitability and Debt Comparison
1 As of close of September 18, 2015
2 EPS change, Operating Cash Flow change, and Debt-to-Equity Change derived from Morningstar data on close of September 18, 2015
3 Latest quarter D/E compared to 2014’s
4 Latest quarter D/E

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The Top Canadian Energy Dividend Company

We all know companies in the Energy sector are taking a beating due to the oil price plummet. Many energy companies pay a dividend. Yet, on one extreme some companies slashed their dividends, such as Cenovus Energy Inc (TSX:CVE)(NYSE:CVE) and on the other side of the extreme, there are some that have continued raising their dividends.

Here is the list of Energy companies that have not cut (some even raised) their dividends in the past year: Imperial Oil Limited (TSX:IMO)(NYSE:IMO), Suncor Energy Inc. (TSX:SU)(NYSE:SU), Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ), Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Inter Pipeline Ltd (TSX:IPL), Pason Systems Inc. (TSX:PSI), and Ensign Energy Services Inc (TSX:ESI).

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