Which stocks National Bank added to its dividend all-stars portfolio, why David Rosenberg sees the market "flashing a warning" and more from The Week in Stocks.
Stock of the week: Atco Ltd.
Shares of Atco Ltd. (ACO/X:TSX) jumped 10 per cent this week before paring some of those gains after it announced Oct. 5 that it was selling its Canadian Utilities Inc. subsidiary to Emera Inc. (EMA:TSX) for $14.3 billion. National Bank of Canada Capital Markets analyst Patrick Kenny hiked his price target for the shares of what he dubbed the "new Atco" to $93 from $79, saying the company will have $700 million at hand including an injection from Emera, plus $250 million in Emera shares as part of the deal. Atco shares closed Friday at $79.76. The focus for "new Atco," will be to speed up growth in its core housing, defence and industrial services businesses, Kenny said in a note on Oct. 7. Other analysts hiked their price targets. RBC Capital Markets analyst Maurice Choy raised his to $94 from $80, while TD Cowen's John Mould lifted his to $98 from $76. The Emera deal is expected to close in the third to fourth quarter of 2027. Atco has a 12-month price target of $91.33 based on the calls of six analysts, according to Bloomberg.
Keeping score
Dividend all-stars from National Bank Capital Markets
National Bank of Canada Capital Markets just updated its portfolio of dividend all-stars for the second half, which carries an average yield of 4.9 per cent, compared with the yield on the 10-year Government of Canada bond of approximately four per cent. The portfolio also beat the S&P/TSX composite index in the first half of the year, gaining 10.8 per cent versus 7.2 per cent. "Against a backdrop of continued trade uncertainty and increased market volatility, dividend stocks remain attractive for investors seeking stable and elevated income," National Bank said in a report on Oct. 8. Here's a look at the names that were added: Brookfield Asset Management Ltd. (BAM:TSX) made the cut on an earnings growth outlook in the high teens and a dividend yield of 4.5 per cent, which, since 2022, is up approximately 57 per cent. It has a price target of $70. Shares closed Friday at $65.52. MCAN Mortgage Corp. (MKP:TSX) offers "better positioning in an adverse credit scenario." It has a yield of five per cent and a target price of $27. Shares closed Friday at $20.89. Open Text Corp. (OTEX:TSX) has a long track record of dividend increases since fiscal year 2013. The company has a dividend yield of 4.8 per cent and National expects it to sustain that. It has a price target of $47. Shares closed Friday at $33.82.
Market is 'flashing a warning,' says David Rosenberg
The S&P 500 index has breadth issues and that is a warning sign for investors, David Rosenberg , founder of Rosenberg Research & Associates Inc. said in a note on Oct. 8. The S&P 500 hit a new high this week, but several important metrics have deteriorated between then and the last time the index peaked on Aug. 13, Rosenberg said. For example, nearly 75 per cent of industry groups have declined, the equal-weight index is down five per cent bank and real estate subsectors have lost more than 10 per cent. Since August, few stocks are trading above their 200-day moving average, a move that is considered a bearish signal. "Market breadth tends to lead prices, and right now it is flashing a warning," Rosenberg said.
Defence Investment Agency a 'driver' for these shares, says CIBC
The federal government this week announced it was establishing the Defence Investment Agency (DIA) as a Crown corporation with its own associate minister and a board of directors. The DIA will have the ability the undertake production, procurement and investment for Canada's national defence. "We continue to view the initiative as a key driver for our defence-exposed names," including Bombardier Inc. (BBD/B:TSX), CAE Inc. (CAE:TSX), Chorus Aviation Inc. (CHR:TSX) and Exchange Income Corp. (EIF:TSX), Krista Friesen, an analyst at CIBC Capital Markets, said in a note on Oct. 6. Friesen has a price target on Bombardier of $365. Shares closed Friday at $297.59 and have been on a downswing since late July. The analyst has price targets of $47 and $33, respectively, for CAE and Chorus. They closed Friday at $33.86 and $28.66. Her price target for Exchange Income is $151. It closed Friday at $116.37.
What Cenovus deal for Athabasca means for the shares
Cenovus Energy Inc. (CVE:TSX), announced a deal for Athabasca Oil Corp. (ATH:TSX) for $5.7 billion this week. Initially, investors pushed shares down following the announcement, but they since regained those losses, with Raymond James analyst Micheal Barth saying the proposed purchase is a "better use of capital than (share) buybacks" in a note on Oct. 6. Barth hiked his price target for Cenovus to $53 from $51. Shares closed Friday at $44.75. "All told, we like the deal," as it still leaves plenty of free cash flow to reduce debt and return cash to shareholders, he said. As well, there is a "clear path to tripling production by 2032." National Bank of Canada analyst Travis Wood cut his price target for Cenovus to $57 from $60 but maintained his outperform rating on the deal. Cenovus has a price target of $50.87 based on the calls of 19 analysts, according to Bloomberg.
Price target hikes, cuts, holds and starts
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RBC Capital Markets analyst Harrison Reynolds maintained his price target for DPM Metals Inc. (DPM:TSX) of $65 after it released third quarter production results that indicated the company will hit the high end of guidance. Shares closed Friday at $59.41.
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Raymond James analyst Brad Sturges increased his price target for Flagship Communities REIT (MHC/U:TSX) to $25.25 from $25 on improving occupancy rates and an increase in average long-term lot rentals. Shares closed Friday at $21.15.
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TD Cowen analyst Derek Lessard reduced his price target for Boyd Group Inc. (BYD:TSX) to $175 from $200 but nonetheless named the company a top pick. "We see a rare opportunity to own a high quality compounder before the market recognizes the opportunity," he said in a note on Oct. 8. Shares closed Friday at $111.32.
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RBC Capital Markets analyst Nelson Ng maintained his price target of $20 for Chemtrade Logistics Income Fund (CHE/U:TSX) after the company said it would convert from an income trust to a corporate structure, which Ng said should expose it to more investors. Shares closed Friday at $14.68.
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TD Cowen analyst Derick Ma initiated coverage of Versamet Royalties Corp. (VMET:TSX) with a price target of $21. Shares closed Friday at $14.68.
Every week, the Financial Post breaks down the most interesting developments in the week's world of investing, from top performers to surprising analyst calls and stocks to have on your radar.
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