BMO chief strategist Brian Belski argued for Canadian versus U.S. stocks and also reiterated his belief in dividend growth stocks as an outperforming asset class for the rest of the year,
“The S&P/TSX gained 3.1% in the first quarter, well ahead of most global markets and the strongest quarterly outperformance versus the S&P 500 in 13 years. While the Energy and Materials sectors were core drivers of this outperformance, Canada also saw strong relative performance versus the S&P 500 sectors in Communication Services, Financials, Consumer Staples, and Industrials. Indeed, Canadian relative stability in the face of inflationary pressures and heightened geo-political risk was on full display in the first quarter. As such, we remain steadfast in our view that Canada is a strong relative value play and offers many key points of stability within global equity markets … We remain bullish on both Canadian and US equities; however, we believe price swings and bouts of volatility will become more frequent in the coming months and quarters as the market struggles with rising interest rates, inflationary pressures, supply chain issues and geo-political tensions. As such, we believe investors should look toward dividend growth strategies as a potential way to navigate these risks while maintaining a more bullish outlook and without tilting to more of a defensive sector positioning.”
Mr. Belski screened the domestic market for dividend stocks where free cash flow exceeded payouts and where the payout ratio was less than the market average. The outperform rated stocks on the resulting list included ARC Resources Ltd., Alimentation Couche-Tard Inc., Canadian Apartment Properties REIT, Crescent Point Energy Corp., Dollarama Inc., Enerplus Corp., Gildan Activewear Inc., Granite REIT, Metro Inc., SSR Mining Inc., Stelco Holding Inc. and West Fraser Timber Corp.