In a market obsessed with AI and momentum trades, dividend investors are quietly cashing in. In this episode of In the Money with Amber Kanwar, Laura Lau, Chief Investment Officer at Brompton Funds, shares how she’s finding dividend income in a market chasing growth. With stocks at record highs, Lau explains how to balance yield, total return, and capital appreciation.
My parents left India in search of a better life and more opportunities. They found it in abundance in Canada and worked like crazy so I could have what they didn’t. So I could see the judgement as I dragged my kids on a sweltering “fall” day to pay double apple for apples I had to pick myself. They crossed an ocean so I could get overpriced apples and an Instagram photo.
Here are five things to know:
Breather: Stocks are looking to get back to work after the TSX and S&P 500 fell for the first time in eight sessions. As the US government shutdown continues with no end in sight, gold crossed a milestone overnight above $4,000 an ounce for the first time ever. Silver is hot on its tail, close to $50 per troy ounce which would be a record. Recall, when Rick Rule was on the podcast he said silver will breakout in October. Absent government data, investors will get the minutes from the Fed’s last meeting this afternoon which should shed some light on the debate taking place about easing amidst higher inflation. Although if the shutdown drags on there is risk that we won’t see next week’s inflation numbers. The catalyst for the sell-off yesterday was a negative report on Oracle by The Information that suggested its cloud margins were “razor thin” because of how expensive it is to rent Nvidia chips. The trillion dollar question is whether these companies will see a return on their AI investments. Evercore’s Mark Mahaney says we are already seeing it when it comes to the big tech giants. “Revenue per employee has increased between 2023-2025 by about 29% at Alphabet, 30% at Microsoft, 39% at Amazon, and a whopping 74% at Meta,” wrote Mahaney in a note to clients, “Over the same period, EBIT per employee rose by 41% at Microsoft, 62% at Alphabet, 188% at Meta, and a crazy-high 550% at Amazon.”
Game, set: MEG Energy is delaying its shareholder meeting and Cenovus is increasing its offer for MEG Energy in an attempt to get their deal across the finish line. MEG Energy was supposed to have a shareholder vote tomorrow on the deal. Clearly, they didn’t have enough votes to support the deal. Cenovus is increasing its bid to $29.80/share and increasing the stock component of the offer to 50% from 25% previously. “We received support from the majority of MEG’s shareholders for our transaction. However, many MEG shareholders indicated that they would prefer to receive greater Cenovus share consideration…,” said Jon McKenzie, Cenovus President & Chief Executive Officer in a press release this morning, “We listened to these comments and have changed the consideration under our offer to a maximum of 50% cash and 50% Cenovus shares, while increasing the aggregate purchase price.” The elephant in the room is Strathcona’s hostile all-stock bid which values MEG Energy at $29.67/share. MEG closed at $28.24/share yesterday. Cenovus says this is their best and final offer. Will Strathcona hike their bid even further? That’s the next thing I’ll be looking out for.
Under pressure: Allied Properties slid 6% yesterday after warning that it won’t hit its occupancy targets. The office REIT says the pace of leasing activity in has been slower than expected. This prompted two downgrades, Natonal Bank cut to sell yesterday and Raymond James downgraded this morning. The next big question is around the dividend. Allied Properties has a dividend yield of 8.7% and never cut their distribution even during the pandemic. Critics say they can’t hang on for much longer and the dividend will be cut. “They’ve been dramatically overpaying their distribution,” said Jeff Olin of Vision Capital when he was on the podcast in September. Still, the stock has been on a tear as more and more companies announced return to office policies. Brad Sturges of Raymond James estimates it is paying out 120% of its adjusted cash flow from operations to support the dividend. The company favours selling non-core assets vs cutting the distribution which is eroding the net asset value per unit according to Sturges. “We believe that Allied may be at risk of giving back some trading ground following a very strong total return rally of over +60% generated since its recent trading lows reached in April,” wrote Sturges.
It’s always sunny at Sun Life: Watch shares of Sun Life Financial after being upgraded by TD’s Mario Mendonca. “The upgrade reflects attractive relative sector valuation versus the life insurance peers and the banks, pricing actions in U.S. stop loss, and excess capital used in share buybacks,” says Mendonca. Specifically, Mendonca says the US stop-loss business has been dampening sentiment but Sun Life has said they can reprice its US business after a bad year. This summer we had Sun Life Financial CEO Kevin Strain on the podcast for an in-depth discussion about the podcast in which he touted the insurers ability to do just that. The other driving force to the upgrade is valuation. “The lifecos trade at a 22% discount on a P/E basis, a sharp shift from near parity just six months earlier,” wrote Mendonca who said the group is now more attractive than bank stocks.
Headache: Copper is higher this morning after Teck Resources cut their copper output forecast yet again. Teck is warning that its flagship copper mine in Chile will have lower output going all the way out to 2028. The Chilean mine, known as Quebrada Blanca 2, has been beset by troubles with the mine years behind schedule and billions over budget. Teck just warned about output in July. This comes as it is about to combine with Anglo American in one of the biggest mining mergers ever. Anglo American says it remains fully supportive of Teck despite the setbacks. “The results are negative but feel that the Anglo-Teck deal could act as a floor to share price,” wrote TD’s Craig Hutchison. Copper prices are advancing toward record highs as announcement further compounds a supply crunch at a time of high demand from green technologies and AI infrastructure.
Our next episode comes out tomorrow morning! Don’t miss it!
