Algonquin Power solar farms being constructed near Cornwall, Ont.Handout
Desjardins Securities has pared down its list of top stock picks for 2017 to identify a subset close to the hearts of Globe and Mail readers – dividend stocks.
Desjardins' analysts selected their best Canadian yield plays among the stocks they cover, setting a minimum dividend yield of 3 per cent. The five dividend stocks presented show the largest potential return to one-year target prices.
Algonquin Power and Utilities Corp. (AQN-T)
Target price: $15.25 (Canadian)
Following the $3.2-billion acquisition of The Empire District Electric Co., which closed on the first day of 2017, Algonquin has an "impressive development pipeline" representing almost $6-billion of investment opportunities, Desjardins said. "We have high conviction that AQN will deliver on growth through continued power development project commissionings, investments in the utility segment and likely additional acquisitions on either the power or utility side of the business." The company is poised to deliver annual dividend growth of about 10 per cent over the next few years, the analysts write.
Fiera Capital Corporation (FSZ-T)
Target price: $15.50
Fiera had an active year on the acquisition front, having completed deals for Apex Capital Management, Charlemagne Capital and Centria Commerce, which together added about $13-billion to Fiera's assets under management. In addition to its record of generating organic revenue growth, Fiera has proven itself capable of making acquisitions that add value and integrating those companies successfully, Desjardins said. "We believe these acquisitions will contribute meaningfully to Fiera's 2017 results."
Milestone Apartments REIT (MST.UN-T)
Target price: $23.00
Despite having generated a total return in excess of 30 per cent in 2016, Milestone still trades at a meaningful discount to comparable Canadian REITs, as well as U.S. peers. Concerns that management will rely too heavily on dilutive equity issuance to fund expansion are "more than appropriately reflected in the current trading price," Desjardins said. Meanwhile, most of Milestone's major markets continue to be supportive of apartment fundamentals, the analysts said.
Telus Corp. (T-T)
Target price: $49.00
While Telus trades at a discount to other Canadian telecoms, it generates industry-best growth in earnings before interest, taxes, depreciation, and amortization, as well as dividends. "We believe the current discount is unwarranted given the company's strong underlying fundamentals," Desjardins said. "[Telus] saw a strong wireless performance in the most recent quarter, which should support future profitability." It is also one of the few Canadian companies managing to realize growth in its wireline division, the analysts said.
WPT Industrial REIT (WIR.U-T)
Target price: $13.00 (U.S.)
"[WPT] has the highest-quality asset base of the TSX-listed industrial pure plays, in our view," Desjardins said. Encompassing about 16 million square feet in 12 U.S. states, WPT's portfolio counts high-quality household names among its roster of largest tenants, including General Mills, Unilever, Amazon, eBay, and Honeywell. With recent leasing success, WPT is well-positioned to extend its recent record of generating low-single-digit growth in net operating income, the analysts said. And management will likely also be pursuing acquisitions in the coming months.
Tim Shufelt