FEATURED PRO: Kevin Dehod is vice-president and associate portfolio man-ager of McLean & Partners Wealth Management (www.mcleanpartners.com). The Calgary firm manages money for high net-worth individuals, emphasizing global dividend growth stocks.
Dehod's Perspective: "Our outlook for the market is kind of mixed to neutral. That's because we're in an environment where we've got interest rates on the rise in Canada and the U.S and we've got earnings growth slowing. That creates a bit of a ceiling on the market. I also think we're heading into an environment where investors are becoming a little bit more concerned about risk.
"That doesn't mean you can't still make money in that kind of an environment. It just means you've got to be a little bit more careful in your portfolio. In the last 12 to 24 months, asset allocation and diversification maybe weren't at the forefront of some investors' minds. They could let their oils and income trusts run and do no wrong. But now you've got to pay attention to asset allocation and diversification.
"Our underlying business here is investing in global dividend growth companies so, even if the market goes sideways or flat, we think there are still going to be good opportunities in high-quality companies that are paying good dividends and increasing them."
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| Kevin Dehod |
First Star
* Duvernay Oil Corp. (TSX:DDV)
* Recent Price: $41.20.
* 52-Week Range: $16.67-$43.
* Snapshot: Duvernay is an oil and gas company whose production is heavily weighted in natural gas from operations in the western portion of the Western Canada Sedimentary Basin.
* President: Michael Rose.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 73.6; Revenue (last 12 mos), $133.4 million; Earnings (last 12 mos), $28.4 million; Market Cap, $1.97 billion; Shares Outstanding, 47.8 million.
* Dehod's View: "We particularly like this company because about 90 per cent of their production is in natural gas and we don't believe natural gas prices have as much downside in them as oil prices do. We've been shifting our exposure within the resource sector more toward natural gas-weighted companies. There has been a lot of nervousness in the sector and concern about where commodity prices will be in six months. But one way to hedge yourself against commodity prices is to focus on a com-pany like Duvernay that is adding significant production-per-share growth and cashflow-per-share growth."
* Dehod's Risk Rating: High.
* Web Watch: www.duvernayoil.com
Second Star
* Ketch Energy Trust (TSX:KER.UN)
* Recent Price: $10.40.
* 52-Week Range: $10.30-$15.77.
* Snapshot: Ketch is an oil and gas trust that was formed in January from the combination of Ketch Resources and Bear Creek Energy. Operations are focused in Alberta and weighted toward natural gas production.
* President: Andy Mah.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 18.7; Revenue (last 12 mos), $121.3 million; Earnings (last 12 mos), $15.4 million; Market Cap, $466.9 million; Units Outstanding, 44.8 million; Monthly Cash Distribution, 13 cents per unit; Dividend Yield, 12.7 per cent.
* Dehod's View: "This company is also natural gas weighted with about 80 per cent of their production in natural gas. They've come under some selling pressure on two fronts, one over what the government might decide to do with the income trust sector (after its consultation process) and the other over some production delays (as a result of regulatory issues). As a result, the shares have been taken down quite dramatically, in our opinion. I think the combination of the market becoming impatient with their (production) volumes and the general concern around the sector has driven the shares to very good value here. If you bought it, held it and collected your yield (14.9 per cent), you'd have a pretty good return, even if the share price stayed flat."
* Dehod's Risk Rating: Medium.
* Web Watch: www.ketchtrust.com
Third Star
* Power Financial Corp. (TSX:PWF)
* Recent Price: $32.10.
* 52-Week Range: $29.60-$35.50.
* Snapshot: Power Financial is a financial services organization that has a controlling interest in two major companies - Great-West Lifeco and Investors Group Inc. It also has an interest in European holding company Pargesa.
* Co-CEOs: André Desmarais and Paul Desmarais Jr.
* Head Office: Montreal.
* Vital Stats: Current Price/Earnings Ratio, 14.6; Revenue (last 12 mos), $25.1 billion; 5-Yr Revenue Growth, 7.4 per cent; Earnings (last 12 mos), $1.6 billion; 5-Yr Earnings Growth, 19.3 per cent; Market Cap, $22.6 billion; Shares Outstanding, 704.8 million; Dividend Yield, 2.7 per cent.
* Dehod's View: "This company has increased its dividend 18 per cent per year over the past 10 years. I do expect the dividend growth to slow. Yet, I still believe they can sustain 10 per cent per year in dividend growth going forward. This company is trading at 12.7 times next year's (projected) earnings. By owning this company, you're basically getting a diversified financial services company with a heavy weighting in insurance (through Great-West Lifeco). Right now in Canada, we're seeing short-term interest rates starting to rise. Typically, that environment favours the insurance companies over the banking stocks because the banks will see some margin pressure with rising interest rates. So within the financial services universe, this is a name I'd be overweighting because the insurance business is less susceptible to rising short-term interest rates in Canada. Overall, it's a very defensive, high-quality name."
* Dehod's Risk Rating: Low.
* Web Watch: www.powerfinancial.com Dehod's Edge Record (three picks): +8.6 per cent. Best Pick: Manulife Financial (TSX:MFC) +28.9 per cent. Worst Pick: E.On (NYSE:EON) -5.7 per cent.
Disclosure: McLean & Partners owns shares in the featured stocks in client portfolios and Dehod personally owns shares in Power Financial and Ketch Energy Trust.
(This feature is provided for information purposes. Investors are advised to do their own research or consult a qualified investment professional before making investment decisions.)
