Topic: Daily Advice

Dividend Advisor Hotline – Friday, April 12, 2019

PROCTER & GAMBLE CO., $105.06, New York symbol PG, is one of the world’s largest makers of household and personal-care goods. Major brands include Tide (laundry detergent), Pampers (diapers), Gillette (razors) and Crest (toothpaste).

Starting with the May 2019 payment, the company will raise its quarterly dividend by 4.0%, to $0.7459 a share from $0.7172. The new annual rate of $2.98 yields 2.8%. Procter has paid dividends for 129 years and increased its payout annually for the past 63.

The stock has gained 34% in the past year, and shares now trade at a somewhat high 23.7 times the $4.44 a share that the company will probably earn in the fiscal year ending June 30, 2019. However, that p/e is still reasonable in light of Procter and Gamble’s improving earnings and rising dividend rate.

The company’s dividend payment has now grown an average of 3.0% annually over the last 5 years. Its TSI Dividend Sustainability Rating is Highest.

OUR RECOMMENDATION: Procter & Gamble is a buy.

Procter & Gamble’s recent coverage

GREAT-WEST LIFECO INC., $32.67, Toronto symbol GWO, is Canada’s second-largest insurance company, after Manulife Financial (Toronto symbol MFC). It also offers mutual funds and wealth management services.

Starting with the March 2019 payment, the company raised its quarterly dividend by 6.2%, to $0.413 a share from $0.389. The new annual rate of $1.65 yields a high 5.1%.

Great-West now plans to merge its three Canadian insurance subsidiaries (The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company) into a single firm, The Canada Life Assurance Company. As well, it will sell all of its insurance products under that Canada Life brand.

The move should let the company cut its administrative and marketing costs. The merger needs regulatory and other approvals, so the restructuring process will likely take two to three years.

The dividend has risen an average of 6.1% annually over the last 5 years. The company’s TSI Dividend Sustainability Rating is Above Average.

OUR RECOMMENDATION: Great-West Lifeco is still a hold.

Great-West Lifeco’s recent coverage

IMPERIAL OIL LTD., $38.77, Toronto symbol IMO, is Canada’s third-largest publicly traded oil company, after Suncor (No. 1) and Canadian Natural Resources. U.S.-based ExxonMobil (New York symbol XOM) owns 69.6% of Imperial.

Starting with the July 2018 payment, Imperial increased its quarterly dividend by 18.8%, to $0.19 a share from $0.16. The new annual rate of $0.76 yields 2.0%.

The Alberta government recently ordered oil producers in the province to cut their total daily output. That’s because a lack of pipeline capacity has led to a glut of stored crude in the province and helped to push down the price of Western Canadian crude.

The plan made it less economical for Imperial to ship its crude by rail to U.S. markets. As a result, the company cut its rail shipments from about 170,000 barrels a day in December 2018 to almost zero in February 2019. To put that in context, Imperial produced 383,000 barrels a day in 2018.

However, now that crude prices have risen and it is once again economical, Imperial has resumed limited rail shipments.

The company has increased its dividend by an average of 9.6% annually over the past 5 years. Its TSI Dividend Sustainability Rating is Above Average.

OUR RECOMMENDATION: Imperial Oil is a buy.

Imperial Oil’s recent coverage

CALIAN GROUP LTD., $34.06, Toronto symbol CGY, has two main operations: Business and Technology Services (supplying 70% of the company’s revenue) provides clients with engineers, health-care workers and other skilled professionals on a contract basis; and Systems Engineering (30% of revenue) sells hardware and software for testing, operating and managing satellites and other communication systems.

Calian pays a quarterly dividend of $0.28 for a 3.3% yield. It raised its dividend five times between 2010 and 2012, and has held it steady since then.

The company has now agreed to acquire Germany-based SatService. That firm offers engineering solutions and products for the satellite communications market. Its business will support the expansion of Calian’s Systems Engineering operations in the European market. SatService product offerings include the Sat-NMS line of software and hardware solutions for antenna control and tracking, monitoring and control systems, and L-band transmission.

The purchase price is 6.45 million euros ($9.7 million Canadian)—plus two additional payments in December 2019 and December 2020, dependent on the SatService operations achieving certain profit targets.

The company has an Above Average TSI Dividend Sustainability Rating.

OUR RECOMMENDATION: Calian Group is still a buy.

Calian’s recent coverage

SNAP-ON INC., $155.97, New York symbol SNA, makes tools for auto mechanics and sells them through a fleet of franchised vans that visit garages. It also makes specialized tools for industrial customers.

Snap-On has paid quarterly dividends continuously since 1939. With the December 2018 payment, it increased that payment by 15.9%, to $0.95 a share from $0.82. The new annual rate of $3.80 yields 2.4%.

The company has now acquired Power Hawk Technologies, Inc. Based in New Jersey, the privately held firm makes rescue tools and related equipment such “jaws of life” cutters and spreaders. Power Hawk sells those products to fire and rescue services and military clients.

Snap-On paid $8 million for the manufacturer. To put that in context, it earned $171.8 million, or $3.03 a share, in the three months ended December 31, 2018.

The new operations give the company an opportunity to sell its other tools to Power Hawk’s customers. However, higher raw material costs and the negative impact of currency rates continue to weigh of its earnings.

The company’s dividend has grown an average of 16.6% annually over the last 5 years. Its TSI Dividend Sustainability Rating is Above Average.

OUR RECOMMENDATION: Snap-On is still a hold.

Snap-On’s recent coverage

Our next Hotline will go out on Thursday, April 18, 2019.


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