(This was originally published in the June 2017 version of The Dividend Growth Newsletter. It is available here.)
Here’s a fun stat: The S&P TSX had the fourth-worst performance in the first half of 2017, returning just 0.69% (see left), finishing only ahead of Israel, China, and Russia. South Korea leads the pack with an 18.03% return, and only two countries (the U.S. and Spain) outside of the Middle East and Asia finished returned more than 10%. According to BNN, Canada ranked 91st among the 103 indices that are tracked, thanks to huge declines in the energy sector with low oil prices.
That hasn’t stopped prognosticators from predicting a huge rebound in the second half, citing more appetizing equity valuations. A rising loonie will help certain sectors, including grocery chains (such as Metro, Inc., which is featured in the Canadian Dividend Aristocrat Portfolio), and a Reuters poll showed that many believe the TSX will reach new highs by mid-2018… but we all know how wrong polls can be.
In times of poor overall returns and further geopolitical risk with North Korea’s constant missile experiments, dividends are once again attractive investments for their steady dividends and high yields.
(This was originally published in the April 2017 version of The Dividend Growth Newsletter. It is available here.)
Despite a record-breaking 24 executive orders – the most since World War II – in Donald Trump’s first 100 days in office, it seems very little has changed. Twitter continues to showcase the best and worst of Trump, the U.S. is still very much part of NAFTA, tax reform has yet to come, and a single brick has to be laid for the wall. Interest rates remain low, the housing crisis in Vancouver and Toronto have hit a fever pitch, and the Canadian dollar continues to be weak along with weak oil prices.
Combined with the French presidential election, which has eerily mirrored the most recent U.S. election so far with a right-wing populist going up against a center-left opponent who’s leading the polls, and North Korea, where Kim Jong-un’s fascination with flexing his military muscle can no longer be considered as just a sideshow, it’s understandable why some investors remain cautious, especially with a stock market that continues to try and push to new highs.
However, earnings for 1Q 2017 have looked mostly positive so far, and that may be the single biggest driving factor of the rise in the Dow and S&P 500. Dividend aristocrats such as Metro and McDonald’s have all reported impressive earnings, and continue to provide value through capital gains and consistently growing dividends. They have proven to provide downside protection relative to other equities, which makes them ideal in uncertain times.