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After a brief summer hiatus, here is a look Norm Rothery's Safer Dogs of the TSX and his Cheap and Thrifty Stocks
The Safer Canadian Dogs and Climbing Cats are back after their brief summer vacation and are raring to go. The new stocks that pass each test are shown in the tables below. The two features will resume their regular schedule this fall with alternating appearances every other week.
Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.
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The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.
My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.
Here’s the updated Safer Dogs of the TSX, representing the top yielders as of June 8. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase—barring some calamity.
| Name | Price | P/B | P/E | Earnings Yield | Dividend Yield |
|---|---|---|---|---|---|
| CIBC (CM) | $104.98 | 1.63 | 9.53 | 10.50% | 4.95% |
| BCE (BCE) | $58.60 | 3.58 | 18.09 | 5.53% | 4.90% |
| Power (POW) | $30.69 | 1.07 | 10.38 | 9.64% | 4.67% |
| TELUS (T) | $44.62 | 3.16 | 21.25 | 4.71% | 4.42% |
| Bank of Nova Scotia (BNS) | $76.55 | 1.72 | 11.83 | 8.45% | 4.13% |
| National Bank (NA) | $56.82 | 1.84 | 11.76 | 8.50% | 4.08% |
| Bank of Montreal (BMO) | $89.00 | 1.49 | 10.91 | 9.17% | 4.04% |
| Royal Bank (RY) | $90.89 | 2.02 | 12.35 | 8.10% | 4.00% |
| Sun Life Financial (SLF) | $46.83 | 1.43 | 11.1 | 9.01% | 3.72% |
| TD Bank (TD) | $66.56 | 1.83 | 12.58 | 7.95% | 3.61% |
Source: Bloomberg as of September 6, 2017
The Climbing CATS strategy is based on a momentum plus value combination. It starts with reasonably-sized Canadian firms and then focuses in on value stocks. Call them Cheap And Thrifty Stocks, or CATS, if you will. But it also looks for firms with strong relative momentum that have Climbed higher in recent times. Both value and momentum have worked well in the past.
More specifically, when it comes to size we start with a list of about 200 of the largest stocks that trade on the TSX. We then narrow down the search to stocks that have low-to-moderate price-to-earnings ratios. Finally, we pick stocks that have fared the best over the last 12 months.
The current list of Climbing CATS is shown in the table below. It represents a starting point for those who want to put some money to work and is best suited for more aggressive and experienced investors. Investors should aim to hold the CATS for a year.
| Name | Price | P/E | Dividend Yield | Total Return |
|---|---|---|---|---|
| Tembec (TMB) | $4.56 | 10.36 | 0.00% | 351.49% |
| Air Canada (AC) | $22.33 | 7.39 | 0.00% | 143.78% |
| Cogeco (CGO) | $82.37 | 11.85 | 1.65% | 64.14% |
| AGF Management (AGF.B) | $7.75 | 14.09 | 4.13% | 63.75% |
| IAMGOLD (IMG) | $8.45 | 5.87 | 0.00% | 52.53% |
| West Fraser Timber (WFT) | $64.30 | 11.09 | 0.44% | 45.21% |
| Chorus Aviation (CHR) | $8.15 | 10.37 | 5.89% | 44.97% |
| Manulife Financial (MFC) | $23.92 | 13.07 | 3.43% | 39.16% |
| Canfor (CFP) | $21.93 | 12.32 | 0.00% | 37.49% |
| Norbord (OSB) | $44.47 | 11 | 4.50% | 37.38% |
Source: Bloomberg as of September 6, 2017
Price: Closing price per share
P/B: Price to Book Value Ratio
P/E: Price to Earnings Ratio
Earnings Yield: Earnings divided by Price, expressed as a percentage
Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage
As always, do your own due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)
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