Large Cap Canadian Value Stock Picks

This Blog has recommended extreme caution continually since mid April. With markets gyrating up and down, I’d like to recommend some safer Large Cap Canadian Value Stocks. These usually offer lower Price to Earnings Ratios and Higher Dividend Yields. My top value picks are as follows:

• Financials:
• Bank of Montreal (BMO ) paying a 4.53% annual dividend
• CIBC (CM) 5.09%
• National Bank (NA) 4.34%
• Royal Bank (RY) 3.84% (stock also declined 3.83% this past week)
• TD 3.39%
• AGF Management (AGF.B) 7.20%

• Telecommunications:
• Bell Alliant Trust Units (BA.UN) 11.57%
• BCE 5.44%
• Rogers (RCI.B) 3.45%
• Shaw (SJR.B) 4.28%
• Telus (T) 4.78%

• Energy and Trust Units:
• Cineplex Galaxy (CGX.UN) 6.49%
• Crescent Point Energy (CPG) 7.33%
• Encana (ECA) 2.58% (declined 4.08% this week)
• Pengrowth (PGF.UN) 8.28%
• Vermillion (VET.UN) 6.67%.

Be careful with trust units as most convert to corporations in 2011.

Longer Terms Picks

• Financial and Insurance Companies:
• Great West Life (GWO) 5.03%
• Manulife (MFC) 3.45% (hit a new 52 week low this past week)
• Power Financial (PWF) 4.88%
• Sunlife (SLF) 5.30%.

These companies should be watched as they tend to mirror market conditions and could still fall.

Market Mirrors: When markets improve again, keep a close eye on Canadian Natural Resources (CNQ) & Teck (TCK.B).

• Preferred Shares: Most banks pay 5.7%, CIBC & National paying slightly higher. Insurance companies pay around 6.0%. Topping the list are Bombardier (BBD.PR.C & D) @ 7.0%, Brookfield Properties (BPO.PR.L & N) @ 6.45% & 6.15%. Recommendation is for Canadian Western Bank (CWB.A) @ 6.54%.
• High Yielding Corporate Bonds: (for RSP’S) 10 year bonds: YPG Holdings @ 6.76% & Fairfax Financial @ 6.76%.

Be wary and sell in to strength, Warren.

Defensive Stock & Investments for Volatile Markets

3 weeks ago, the TSX Composite of Large Cap Stocks decreased by 4.39%. 2 weeks ago, the TSX increased by 3.84%. This past week the TSX decreased by 0.10%. With the markets swinging wildly in both directions, it would be prudent to reduce overall market positions (sell on strength) and trading frequency and wait it out for better times. I’m therefore recommending some strong Large Cap Canadian dividend paying stocks, preferred shares and bonds.

• Provincial Strip Coupon Bonds offer safety and yield for RSP’s. Annual cumulative yield to maturity on bonds due 2020 are approximately 4.3%, 2022 @ 4.5% and 2025 @ 4.75%. Provincial Bonds paying bi-annually pay a slightly lower yield than strip coupon bonds.

• Corporate Bonds offering higher than average yields include the following: Fairfax Financial June 22, 2020, 7.25% Coupon yielding 6.70% annually if held to maturity, Brookfield Renewable November 11, 2018, 5.25% coupon yielding 4.93%, H&R Real Estate February 3, 2017, 5.90% coupon yielding 5.05%, Citigroup Finance September 22, 2014, 6.75% coupon yielding 4.544%, & Consumers Waterheater April 30, 2014, 6.75% coupon yielding 4.98%.

• Preferred Shares: Most larger Canadian bank preferred shares are paying  approximately 5.6% annually. CIBC preferred shares (CM.PR.D, E, G, L,  & M) are yielding 5.8% with National Bank (NA.PR.K, M, O & P) yielding 5.9%. Insurance companies including Great West Life (GWO), Manulife (MFC) & Sunlife (SLF) are also yielding 5.9%. Industrial Alliance (IAG.PR.A) pays 6.0%. Top yielding preferred shares include: Bombardier (BBD.PR.C & D) yielding 7.0-7.1%, Brookfield Properties (BPO.PR.L) @ 6.475% & BPO.PR.N @ 6.1475%. Lastly, note Canadian Western Bank (CWB.PR.A) yielding 6.46%.

• High Dividend Paying Canadian Large Cap Stocks worth considering include: Financials: Bank of Montreal (BMO), CIBC (CM), National (NA), Royal (RY) & TD. Telecom: BCE, Rogers (RCI.B), Shaw (SJR.B), & Telus (T). Stay defensive, summer can be a dangerous time in the stock markets.  Warren.