We’re halfway through the year, and income investors are still having trouble gaining traction, despite the Bank of Canada rate cut in early June.
As of the close on June 28, all the key income-generating sub-indexes were still in the red. The S&P/TSX Capped Utilities Index was down 3.32 per cent year-to-date, the Real Estate Index was off 5.96 per cent, and the Communications Index had lost a disquieting 13.67 per cent.
Many income portfolios own stocks in these three market sectors. While they continue to generate good cash flow, investors are watching nervously as their share prices drop. Looking at my Income Investor recommended list, BCE Inc. is down 15.07 per cent this year. Telus Corp. has lost 12.17 per cent. RioCan REIT ) is off 9.72 per cent. Emera Inc. has given back 9.24 per cent. Canadian Utilities Ltd. is off 7.34 per cent. Fortis is down 2.46 per cent. And the beat goes on.
These are all sound companies with high yields and a long history of dividend increases. But they are all capital-intensive and have been hammered by a combination of high interest rates and a slow-growth economy.
They will eventually recover, but it may take a while. In the meantime, what income stocks are doing well at this point?
In fact, many of our picks are showing robust results so far in 2024. They include Fairfax Financial Holdings Ltd. , up 27.31 per cent; Manulife Financial Corp. , ahead 24.42 per cent; Suncor Energy Inc. , up 22.85 per cent; Peyto Exploration & Development Corp., with a gain of 21.10 per cent; Valero Energy Corp. (VLO-N), ahead 20.58 per cent; and Procter & Gamble Co. (PG-N), which has gained 12.54 per cent.
Here are updates on other winners. Prices are as of the close on June 28.
Keyera Corp.
- Ticker: KEY-T
- Type: Common stock
- Current price: $37.89
- Originally recommended: July 21/04 at $6.03 (split-adjusted)
- Annual payout: $2
- Yield: 5.3 per cent
- Risk rating: Moderate
Comments: Keyera is primarily in the natural gas and natural gas liquids (NGL) business, providing such services as gathering, processing, fractionation, storage, transportation and marketing. It does not do any exploration or production.
Net earnings for the first quarter were $70.9-million (31 cents a share), down from $137.8-million (60 cents a share) the year before. However, adjusted EBITDA improved to $314.3-million from $292.2-million in the same period last year. Distributable cash flow was $205.3-million (90 cents a share), compared with $227.4-million (99 cents a share) in 2023.
“We’ve had a solid start to the year, as the disciplined execution of our strategy continues to drive strong performance across all three of our business segments,” CEO Dean Setoguchi said “Our integrated value chain makes us more competitive, allowing us to fill available capacity and pursue capital-efficient growth opportunities. We are well positioned to maximize shareholder value by continuing to compound returns over the long term.”
Keyera is in a strong financial position, with net debt to adjusted EBITDA at 2.2 times – below the targeted range of 2.5 to 3 times. The company says it is well positioned to equity self-fund future growth opportunities when they occur.
The stock is up 18.3 per cent so far this year.
Action now: Buy for yield and modest capital gains potential.