What are we looking for?
What the fund pros are buying.
More about the fund
The $440-million Canadian dividend and income equity fund has been run since 1997 by Barry Morrison of Morrison Williams Investment Management Ltd. It gained 8.5 per cent for the year ended Oct. 31 versus an 0.8-per-cent loss for the S&P/TSX Total Return Index. Over 10 years, it has matched the index's annualized 8.4-per-cent gain.
The fund, which invests mainly in dividend-paying stocks, income trusts and real estate investment trusts, has a current yield around 5.7 per cent. "We look at the yield but … we have companies that are going to grow, and give us some capital gains," he said. "I like to think that I can get 7 to 9 per cent [total return]out of these investments."
He expects the Canadian market will return to a positive territory next year as more investors wake up to the fact that they can do better in dividend-paying securities than by sitting in bonds. "I believe that we are heading for a nuclear winter in investment-grade bonds," he said. "You are going to see returns that are at best in the 1-to 3-per-cent area for an extended period of time."
What did we find?
An eclectic mix of names with a robust 38-per-cent gain this year from Pembina Pipeline Corp.
Shares of this transporter of natural gas liquids and crude oil in Western Canada got a lift on expectation that it would be added to the MSCI Canada Index this week, Mr. Morrison said. While its shares could sell off a bit on profit-taking, there is still further upside to this stock from current levels, he said. "It is a very well-managed utility that is expanding its pipeline system.… I think it is an excellent takeover candidate too."
He is also a fan of clean energy developer Northland Power Inc., which operates natural gas, wind and biomass-powered electricity plants. The company's cash flow should significantly increase over the next three years as more of its projects come on-stream, said Mr. Morrison, who has owned this stock since 1998. "It is also a well-managed company."
Canadian oil and gas producer Vermilion Energy Inc. is also attractive for international exposure because 80 per cent of its business is done outside of Canada in countries such as France, Australia, Netherlands and Ireland, he said. "It also has a smart management team," he added.