TD analyst thinks dividends in this sector are hefty and safe

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

BMO senior economist Robert Kavcic detailed a stumbling domestic real estate market,

“Canadian home prices are falling again, with the broad MLS HPI down 2.1% year-over-year. In March alone, prices fell 11.9% annualized (seasonally adjusted), while they are now tracking down 8.5% annualized over the latest three months. Rate cuts are clearly not helping, with the lowest available mortgage rate still stuck around 4% or slightly above (rates will vary), and confidence weighed down by the trade war. The weakness is mostly an Ontario story, where buyers’ markets are evident across a number of cities. In Toronto, the glut of condos hitting the resale market is marking one of the weakest spots in Canadian real estate, with prices down 4.5% y/y. Single-detached prices in Toronto are also below year-ago levels after falling in March. Condo markets across the smaller Southern Ontario cities (see Barrie, Niagara and London) are performing even worse. It’s a long way back to the frothy early-2022 highs, in terms of both time and dollars”

“Cdn Home Prices Still Stumbling” – (excerpt, chart) Bluesky

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TD analyst Sean Steuart assesses the sustainability of the hefty dividends available in renewable power stocks,

“We attribute renewable IPP share price declines to a few primary factors: 1) investors’ concern around U.S. policy support (including potential changes to tax credits); 2) an expectation that aggressive tariffs will lead to wind, solar, and storage capital cost inflation; and 3) an emerging view that corporate PPA growth tied to data center build could decelerate. In our view, defensive attributes outweigh those concerns. Key points: We consider the average sector dividend yield of 5.1% to be relatively safe. That average is bracketed by BEP and NPI at the high end (6.6% and 6.5%, respectively) and BLX at the low end (2.3%). Sector balance sheet exposure to short-term rate pressure is manageable. Renewable IPPs carry high leverage ratios, but most debt is non-recourse and amortizes over asset-specific contract duration. Contracted cash flows vary quarter-to-quarter but are secure over the long run. The weighted average contract duration for the sector is 11 years and an estimated average 93% of revenues are contracted, for the most part with embedded inflation escalators. Renewable IPP valuations remain near trough levels. At an average 10.4x 12-month forward EV/EBITDA, the Canadian sector average is 21% below the long-term average of 13.1x. We have Buy ratings on NPI, BEP, and BLX. NPI and BEP offer relatively high and, in our view, safe dividend yields”

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BMO analyst Matthew Murphy provided top picks in the global mining sector,

“We are reinstating coverage of 15 senior gold, copper, and zinc miners. We view gold equities as offering exposure to central bank reserve diversification trends with portfolio insurance benefits. Among gold miners we rate AEM, IMG, K, and NEM Outperform, and ABX and PAAS Market Perform. In the royalty and streaming names we rate WPM and FNV Outperform, and RGLD Market Perform. Copper gives investors exposure to a key input to the ongoing re-configuration of the industrial economy. While investors are wary of pro-cyclical exposure at present, in our experience this is often the best time to build positions in the space. We rate TECK, FM, HBM, ERO, and MTAL Outperform, and NEXA Market Perform. We have a slight preference for copper over gold miners on valuation, but both sectors should be a part of the portfolio, in our view”

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Bluesky Post of Day:

Diversion: “For the First Time, Artificial Intelligence Is Being Used at a Nuclear Power Plant” – Gizmodo