A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Citi global equity strategist Mert Genc believes that one of the reasons the low-yielding U.S. equity market is outperforming global competitors is that dividend growth is faster and notes that “A global dividend momentum strategy would have outperformed the MSCI ACWI benchmark by 13% since 2010 … The historical message is clear: get dividends right, and you will get share prices right”
Mr. Genc’s Wednesday report “Buy Dividend Momentum” includes a screen for companies with the highest chance of dividend growth. The U.S. equity screen includes Caterpillar, JP Morgan Chase and Marathon Petroleum. The ex-U.S. list of dividend growers has Schneider Electric, Volkswagen, Nestle and Suncor Energy.
“@SBarlow_ROB C: U.S. dividend growth ideas “ – (full table) Twitter
“ @SBarlow_ROB C: ex-U.S. dividend growth stock ideas” – (full table) Twitter
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The yield spread on U.S. high-yield corporate bonds and loans (average corporate bond yield minus related Treasury bond yield) has been among the most reliable indicators of a U.S. recession and the end of bull markets in equities.
There is no need for investors to panic yet but rising junk spreads are a trend to watch carefully,
“The more cautious mood in the market about where the U.S. economy is headed has made loan investors insist on stricter terms, including higher interest rates. This could ultimately restrict access to capital for the most heavily leveraged companies, preventing them from refinancing their debt, capital markets experts said. ‘It is not clear that there is a recession coming next year, but the loan market is positioning as if one is coming,’ said Rizwan Akhter, a managing director at credit investment firm York Capital Management.”
“Junk loan market tensions signal end of buyout-led binge” – Reuters
“Debt is the lifeblood of coal, oil and gas companies. Cut off the flow, and they can’t survive for long” – Bloomberg
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Bank of Montreal economists warned on domestic manufacturing growth earlier in the week, but National Bank economist Krishen Rangasamy presented a more optimistic view in a Wednesday research report,
“Canada’s capital stock grew last year at the fastest pace since 2015. This morning’s data from Statistics Canada indeed showed net stock of capital climbing 1.2% in 2018 with gains in Ontario, Quebec and BC, dwarfing a small decline in Alberta… The 2.2% increase in Ontario was actually the fastest since 2007, as most industries in that province saw increases in capital stock. As today’s Hot Charts show, even Ontario’s beleaguered manufacturing sector saw its net capital stock increase for the first time since 1999”
“@SBarlow_ROB NBF: "Canada: Is capital destruction finally over in the manufacturing sector?"” – (research excerpt) Twitter
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Diversion: “Canada’s Most Dangerous Places 2020” – Macleans
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