**January 31st Issue of The JMRD Market Observer**

February 2, 2014

In This Week’s Market Observer…

 

  • Announcements! Announcements! JMRD one of the Top 50 Advisors in Canada!
  • JMRD and the London Lightning – February 13th
  • National Bank’s 2014 Dividend All-Stars
  • Investing in Canadian Tech. – Investible Universe Expanding
  •  Preferred Shares: Non-Viable Contingent Capital
  • Retirement Corner
  • Week at a Glance
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

 

JMRD one of the Top 50 Advisors in Canada!

The JMRD Wealth Management Team has been named one of the top 50 Advisors in Canada by Wealth Professional Magazine.  Please see the below link for the full article and listings as well as the attached congratulatory letter from our National and Regional Managers.

Link to full article

Congratulations JMRD

JMRD and The London Lightning

As was the case in 2013, we are pleased to announce that JMRD will be the game sponsors of the February 13th matchup between the London Ligthning and the Ottawa Skyhawks.  Tip off is 7:00 at the Budweiser Gardens in London.  We have some tickets available so please call or email Nicole Dell (at 519-439-6452 or nicole.dell@nbc.ca) for more information, or to reserve a seat.  National Bank has been a proud sponsor of the Lightning since its inaugural season in London and JMRD is happy to be partnering with the team again.  We hope to see you there.

National Bank’s 2014 Dividend All-Stars

For investors seeking stable, predictable, elevated income and exposure to high quality companies, the Dividend All-Stars basket reflects NBF’s favourite ideas for 2014. Last year’s list returned 19% while 2012’s All-stars were up 12%. The link to the report is below.

National Bank analysts collectively cover over 330 TSX-listed equities, of which roughly half offer investors income in the form of dividends or distributions. To help navigate this universe we assembled a portfolio that contains 34 of NBF’s favourite income ideas, the basket spanning a variety of industries, sizes and liquidity, the average yield a healthy 5.8%.

The investment criteria for the list includes:

1. Dividend/distribution yield greater than ~3.5%;

2. Extremely low risk of the current payout proving unsustainable; and

3. Positive analyst bias regarding the prospects for share/unit price.

Takeaways

NBF’s 2013 Dividend All-Stars portfolio introduced Jan. 23, 2013 returned income of 5.9% and realized an average price return of 12.5% (until Dec. 31, 2013), this 18.4% total return ahead of the S&P/TSX Composite’s 9.3% for the same period (2.8% income + 6.5% price return for the index).

This is the second year of meaningful outperformance since NBF’s Dividend All-Stars portfolio was introduced. In 2012 the basket returned income of 6% and realized an average price return of 6.8%, this 12.8% total return ahead of the S&P/TSX Composite’s

3.1% for the same period (2.8% income + 0.3% price for the index).

27 of the 38 names highlighted as 2013 All-Stars (71%) outpaced the market. In 2012 80% of the All-Stars outperformed (28/33 equities).

12 All-Stars increased dividends in 2013, an impressive 32% of the basket (AltaGas +6.3%, BMO +2.7%, Bonterra Energy +11.5%, Cathedral Energy Services +10.0%, Canadian Energy Services +18.2%, Dundee Industrial REIT +3.7%, EnerCare +3.6%,

First National +7.7%, Keyera +11.1%, Premium Brands +6.3%, Surge Energy +19.0%, Whitecap Resources +5.0% and Transcontinental paid an ~8% special). Colabor’s 67% dividend cut was the first from an All-Star since the portfolio was introduced. In 2012 15 All-Stars (45% of portfolio) increased distributions/dividends.

The average yield of an All-Star is elevated at 5.8%, but payout is easily funded for each, with most equities having the capacity to grow dividends/distributions over time.

For investors seeking stable, predictable, elevated income and exposure to high quality companies, the following basket reflects NBF’s favourite ideas for 2014. We would add that Artis REIT, Crescent Point, Gibson Energy, Keyera, Pembina Pipeline and Whitecap Resources are held in the JMRD Diversified Income & Growth Basket while Canyon Services and Inter Pipeline are holdings in the JMRD All-Cap Growth Basket.

Dividend All Stars

Investing in Canadian Tech. – Investible Universe Expanding

Last year was a terrific year for the Canadian Technology sector, with the TSX Composite up 10%, the technology sub-index delivered a 36% return trailing only the Health Care index (up 72%) and Consumer Discretionary (up 40%). While this performance is unlikely to repeat, there remains some terrific opportunities in the sector. NBF’s Tech analyst Kris Thompson expects the sub-index to double in size over the next several years as existing vendors grow organically and through acquisitions and new stocks are added to the index.

Top picks for the remainder of 2014 from NBF’s current coverage list

Software & IT services

CGI Group

Open Text

Constellation Software

Halogen Software

Dividends

MacDonald Dettwiler

Open Text

Constellation Software

COM DEV

Mediagrif

Axia NetMedia

Growth

Avigilon

Sandvine

Guestlogix

Included in this note on the Canadian tech landscape and why NBF remains bullish on the sector:

o An overview of our tech coverage list and stock performance in 2013;

o The largest 75 tech stocks in Canada by market cap (up from top 50 last year); o Technology within the S&P/TSX Composite, past and present;

o Investing in Canadian dividend stocks;

o Tech valuations vs. the major indices and some high-flyers;

o IPO window open;

o M&A a continuing theme driven by record cash balances and still low interest rates;

o Rising yields favourable for technology stocks;

o Venture capital making a comeback; o Government funding environment improving;

o Canadian dollar weakness a boon for most vendors;

o Top down what Gartner says about the global tech market;

o Global GDP growth outlook favourable; Technology stocks in Canada, and globally, are ripping; don’t get left behind.

 Information Technology

Preferred Shares – Non-Viable Contingent Capital (NVCC)

Over the past week, Royal Bank, National Bank of Canada and Canada Western Bank have issued a new series of preferred shares called “Non-Viable Contingent Capital (NVCC) Preferred Shares”. These shares contain a new clause allowing for the issue to be converted into common shares in the event the issuer is deemed non-viable. By including this clause, the preferred shares will qualify as Common Equity Tier one Capital on the issuer’s balance sheer. This report examines Non-Viable Contingent Capital (NVCC), its principles and what are its trigger events.

NVCC Preferred Shares

Week at a Glance

Week At A Glance

Retirement Corner

 Living in retirement: Seven things I wish I could tell my 35-year-old self (Globe and Mail)

  “Five things to consider before buying a snowbird property in the U.S.” (Globe and Mail) 

Reads of the week

“12 legendary investors on what to do with your money now” (Globe and Mail)

“Facebook Turns 10: The Mark Zuckerberg Interview” (Business Week)

Mall makeover: A new retail fight heats up” (Globe and Mail)

“Henry Groppe: Oil sector looking in wrong place for coming seismic shift” (The Globe and Mail)

“Yedlin: Talk of U.S. energy independence more myth than fact” (Calgary Herald)

“If You Are Bullish, You Want The Broncos To Win

“Wes Hall: From mail room clerk to Bay Street power broker” (Globe and Mail)

 “5 tips for younger investors who are just starting out” (Financial Post)

Economic Calendar

Monday February 3rd – Canadian Industrial Product Price Index, Canadian Raw Materials Price, U.S. ISM Manufacturing, U.S. Total Vehicles Sales

Tuesday February 4th – ISM New York, U.S. Factory Orders

Wednesday February 5th – Canadian Building Permits, U.S. ADP Employment Change, U.S. Non-Manufacturing Composite

Thursday February 6th – Canadian Merchandise Trade, Canadian Ivey Purchasing Managers Index, U.S. Challenger Job Cuts, U.S. Initial Jobless Claims

Friday February 7th – Canadian Unemployment Rate, Canadian Net Change in Employment, U.S. Employment Rate

Earnings Reports

Monday February 3rd – Suncor Energy

Tuesday February 4th – Bell Aliant, Westjet Airlines, Gilead Sciences

Wednesday February 5th – Intact Financial. Walt Disney Co

Thursday February 6th – BCE Inc,  Fortis, Shoppers Drug Mart, General Motors

Friday February 7th – Cameco

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