RE:RE:RE:RE:RE:X Day TODAY MAY 22nd Somes notes on Banks/Pipelines/Utilities
The banks are a key example here as their fiscal second-quarter reporting season kicks off next week. Analysts are expecting sharply lower profits and a spike in the number of bad loans. As well, dividend hikes are off the table.
Telecom companies have been dealing with struggling business customers. REITs face the prospect of unpaid rents from some tenants. Pipelines are reflecting concerns about the impact of low oil prices. Even utilities face the prospect of reduced power consumption from the decline of economic activity.
Even so, the current bout of economic uncertainty won’t last forever, and hefty dividends may already be compensating for risks.
Analysts expect that bank dividends are safe, for now at least. Among REITs, Mr. Bushell sees the potential in the hard assets of RioCan. Mr. Isherwood likes Choice Properties, which gets about half its revenue from Loblaw stores. He added Bank of Montreal to the firm’s core Toronto-Dominion Bank holdings. He has also been buying BCE shares.
“I think it is really hard to make an argument that the dividend would be threatened,” Mr. Isherwood said.
Full disclosure: The author owns shares in Hydro One, Enbridge and an exchange traded fund that tracks all Big Six bank stocks.