Archives for February 21, 2018

Canadian manufacturing rebounds in fourth-quarter despite soft December

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The sales jump in the fourth quarter offset the 1.4 per cent decline in the previous quarter

Statistics Canada says the petroleum sector sales contributed to a softer December manufacturing report, but also contributed to higher sales for the overall fourth quarter of last year. (Jeff McIntosh/Canadian Press)

The Bank of Canada should be pleased with a year-end rebound in the Canadian manufacturing sector, according to new report from Scotiabank.

Statistics Canada said manufacturing sales in the fourth quarter of last year rose by about 2.8 per cent to $164.8 billion, driven in part by higher sales of petroleum and coal products, but mostly due to higher prices.

The rise in the three months to December followed a 1.8 per cent decrease in sales in the previous quarter.

“I would think that on net the [Bank of Canada] will be encouraged by the magnitude of the rebound in the manufacturing sector over the fourth quarter relative to the soft patch in [the third quarter],” said Derek Holt, economist at Scotiabank in a note on Friday.

Holt pointed out that fourth-quarter manufacturing sales volumes were up by a “quite solid” 4.4 per cent from the third quarter on a seasonally adjusted and annualized rate. That offsets the 1.4 per cent decline seen in July to September period.

December softness

While the fourth quarter, as a whole, was up, manufacturing sales in December was down.

Statistics Canada said sales declined 0.3 per cent to $55.5 billion, following a revised increase of 3.8 per cent in November. That was due to a rebound in automotive shipments after the October shutdowns.

Statistics Canada said the December decline was mainly the result of lower sales in the petroleum, coal and food manufacturing sectors.

Economists at TD noted that the slide in December was not a surprise, as the November bounce hadn’t been expected to continue.

“Having said that, the [December] performance was still somewhat disappointing, with the value and volumes of shipments down a touch and nearly half of all industries reporting declines,” TD economist Michael Dolega said in a commentary.

Dolega said that in the wake of the soft December manufacturing report, TD has reduced its forecast for fourth-quarter gross domestic product by about 0.2 percentage points to two per cent.

This secure retirement index hits a 17-year high

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Senior couple retirement

Despite recent market volatility, savers are feeling upbeat about their chances at a secure retirement.

Preliminary results show that this index, The University of Michigan’s “Change in the Likelihood of a Comfortable Retirement Compared with Five Years Ago,” hit a level of 109 in February.

January 2001 was the last time the index reached that level.

Supporting that positive outlook, a recent Fidelity Investments survey of more than 3,100 households showed that the typical saver is on track to have 80 percent of the income the financial services company estimates older Americans will need to cover expenses in retirement.

A combination of rising contribution rates and rising markets have buoyed investors’ sentiment and their balances.

The average 401(k) account at Fidelity hit $104,300 during the fourth quarter of 2017.

“For the average saver — regardless of age or income level — these findings demonstrate the positive impact of knowing where you stand and taking appropriate actions to get on the path to retirement readiness,” said Ken Hevert, senior vice president of retirement at Fidelity.

Keep at it

Enjoy this improvement in your retirement savings outlook, but don’t forget to keep on saving and investing.

The median savings rate in a retirement plan is now 8.8 percent of pay, up from 3.6 percent in 2006, according to Fidelity.

This is still far below Fidelity’s suggested savings rate of 15 percent of salary, including employer matches.

Though near-term market volatility may be enough to send investors to the exits, take the time to revisit your asset allocation and remind yourself of your long-term goals.

Avoid knee-jerk decisions when the market slips.

“If you have an investment allocation, you should design it to weather market conditions,” said Kate Stalter, president of Better Money Decisions in Sante Fe, New Mexico. “Volatility is a normal part of the market, and people forget it.”

3 Growth Stocks to Buy and Hold for the Next 50 Years

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Man in suit on a ladder looking out through binoculars. Mountains in the background

We Fools like to take the long-term view. That’s why we’re constantly on the hunt for businesses that have the potential to deliver for decades on end.

So which stocks do we think investors can safely own for the next half-century? We asked three Foolish investors to weigh in, and they picked Amazon.com (NASDAQ: AMZN), Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B), and Starbucks (NASDAQ: SBUX).

For growth, look toward Omaha

Dan Caplinger (Berkshire Hathaway): There aren’t many stocks I have so much confidence in that I’d hold for half a century, and Berkshire Hathaway isn’t the most obvious choice to be one of them. As morbid as the subject may be, the odds are just about nil that 87-year-old Warren Buffett will live to his 137th birthday, and vice chairman Charlie Munger is even older than Buffett is. Moreover, many see Berkshire more as a value holding than a true growth stock, especially given the role of esteemed value investor Benjamin Graham in shaping Buffett’s investment philosophy.

But the company has both a plan after Buffett and growth potential. Berkshire’s succession plan likely involves longtime Berkshire Re executive Ajit Jain and Berkshire energy veteran Greg Abel. With these two leaders at the helm, Berkshire’s insurance and non-insurance operations should thrive for years to come. With respect to growth, not only is the insurance business likely to see stronger profits in 2018 after hurricane losses hit its 2017 numbers, but Berkshire also has opportunities to put more cash to work and benefit from lower tax rates. Berkshire Hathaway won’t double in a year, but its long-term gains should be ample for the needs of most investors.

Don’t make this too complicated: Buy Amazon

Brian Stoffel (Amazon): It might be exciting to introduce you to a small-cap stock with booming growth that could grow 100 times over. But I’m not going to do that, because one of the best growth stocks to buy and hold is sitting in plain sight: Amazon.

More than anything else, investors with a 50-year time horizon need to remember Amazon’s mission since day one: “To be earth’s most customer-centric company.” This helps the average investor understand how a company that was simply selling books 20 years ago has evolved into the e-commerce- and cloud-computing-ruling, grocery-shopping-revolutionizing, health-care-disrupting behemoth that it is today.

Already, we’ve seen that, despite the company’s size, sales show no signs of slowing down: Sales were up 38%, while operating income jumped almost 150%, during the holiday quarter, and management sees first-quarter sales growth as high as 42%. Half-a-trillion-dollar companies just aren’t supposed to grow like that. But Amazon isn’t your average company.

Perhaps the best way to view the next 50 years for Amazon is summed up by tech blogger Ben Thompson. Expounding upon the massive efficiencies of scale that Amazon offers through both its e-commerce fulfillment centers and its AWS offerings, Thompson concludes: “[Amazon’s] future is to be a tax collector for a whole host of industries that benefit from the economies of scale. … [Amazon] is effectively on its way towards collecting a tax on all of retail.”

I’d want to own the rights to those massive tax levies in 2068.

40 years later it’s still a growth stock

Brian Feroldi (Starbucks): I have no idea what life will be like in 2068. However, I’m quite certain that millions of humans will still need to get their caffeine fix every day. What how can investors benefit from that long-term need? The best answer is Starbucks.

But will Starbucks be able to pump out growth over the next 50 years? I think that the answer is yes. Here are some of the reasons why:

  • Pricing power: Starbucks’ brand is so strong that the company can regularly push through small price increases without consumers pushing back too hard.
  • Food: The company has consistently grown over the last four decades without ever really getting food right. However, we’ve recently seen signs that the company is finally starting to offer food that is attractive to customers.
  • Tea: Starbucks made a big push into tea a few years ago with its buyout of Teavana. The global tea market is huge and provides a way for Starbucks to services the billions of people who prefer tea instead of coffee.
  • Asia: North America is still Starbucks’ home base, but the opportunity ahead in Asia is massive. Longer term, management thinks that sales in China alone will outpace growth in North America.
  • Consumer packaged goods: Have you noticed that Starbucks’ products have started to find their way onto grocery and convenience store shelves? This allows the company to reach customers (like me) who love Starbucks products but don’t visit the stores very often.

I’m confident that these factors will allow Starbucks to push its revenue and profits higher for decades to come. That makes Starbucks an ideal stock to own for the ultra-long term.

3 Tech Stocks With Fresh, Double-Digit Dividend Increases

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A chalkboard sketch of a bar chart showing growth

With earnings season well under way, lots of companies are announcing dividend increases. If you’re looking for companies with strong dividend growth, here are three tech stocks to consider.

Intel, Cisco, and Corning all announced double-digit increases to their dividends recently. More importantly, each of them looks poised to see more dividend growth in the coming years. Here’s a look at each of these tech stocks’ dividends.

Intel

Recently finishing out a record year and record fourth quarter, Intel was more than ready to announce a dividend increase. Fourth-quarter and full-year revenue were $17.1 billion and $62.8 billion, up 8% and 9%, respectively, when excluding revenue from McAfee in comparisons. Cash from operations also hit record levels, rising to $22 billion.

In its fourth-quarter earnings release, Intel said it was increasing its quarterly dividend by 10% to $0.30, or $1.20 on an annual basis.

Combining its double-digit dividend growth, a dividend yield of 2.4%, and the fact that Intel is paying out just 43% of its free cash flow in dividends, there is plenty of reason to like Intel as a dividend stock.

Cisco

Alongside its second-quarter results for fiscal 2018, networking and information technology company Cisco said it was boosting its quarterly dividend to $0.33 per share, representing a 14% increase. Cisco also authorized an additional $25 billion for stock repurchases.

The announcement came as Cisco reported second-quarter revenue of $11.9 billion, up 3% year over year. Operating income for the quarter was $3.1 billion, up 6% year over year.

Cisco has a strong dividend yield of 2.6% and pays out only about 42% of its free cash flow in dividends, leaving plenty of room for further dividend growth.

Corning

Corning, which makes glass for technology applications such as touch displays and optical communications, announced a dividend increase in January alongside its fourth-quarter and full-year results. The company said it is increasing its quarterly dividend by 16% to $0.18 per share.

The dividend increase caps off a solid year in which full-year revenue from its core business rose 8% year over year to $10.1 billion. Core earnings per share for the period were $1.72, up 11% year over year, when excluding non-cash charges related to tax reform.

With a payout ratio of just 26%, Corning has significant room for increases. Indeed, its low payout ratio helps explain why Corning’s dividend saw the steepest increase of these three stocks. But with a dividend yield of 2.1%, investors who buy Corning for its dividend will have to settle for a lower dividend yield today than Intel and Cisco investors get.

For investors looking for income, these three stocks are worth considering. Each of these companies not only increased their dividends by double-digit percentages, but they have room for more increases and boast meaningful dividend yields and growing businesses.

Samuel Girard becomes Canada’s 1st Olympic champion in 1,000m short track

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Fellow Canadian skater Kim Boutin wins her 2nd bronze of the Olympic Winter Games

Canadian short-track speed skaters won a pair of medals at the Pyeongchang Games on Saturday, with Samuel Girard taking gold in the 1,000-metre and Kim Boutin earning bronze in the 1,500.

Although it started with five people, the men’s 1,000 ended up being effectively a two-man race after two South Korean racers and a Hungarian crashed out just prior to the final lap. Girard and American speed skater John-Henry Krueger were in first and second when that happened, and the wipeouts allowed the two of them to chase each other for victory.

Girard becomes the first Canadian skater to win gold at this distance, as it is an event in which South Korea has dominated, having won five of the eight gold medals in the event, ever.

It’s his first Olympic medal at his first-ever Games, but it’s Canada’s second short-track medal of the day.

Earlier in the day, Kim Boutin of Sherbrooke, Que., won bronze in the 1,500. It’s her second bronze of the Games, having earlier won a bronze in the 500.

Her performance Saturday makes her the first Canadian woman to win two medals in individual short track events at the same Olympics.

And her second bronze must have been especially sweet for her, as her previous race was mired in controversy because South Korean fans felt she impeded Choi Minjeong, who was herself disqualified.

South Korean fans flooded Boutin’s social media with threats and accusations of cheating in the 500-metre race, and she was clearly emotional when she received her medal for that distance earlier this week.

“Just after my warm up I cried, I cried a lot because I was scared,” Boutin told the CBC following the race. “It was pretty tough. I’m a sensitive person.”

But Boutin got a warm reception from the crowd prior to the race on Saturday. And Choi Minjeong got redemption of her own, winning gold in Saturday’s race.

Torch passing for Canada

Girard and Boutin are very close with veteran skaters Charles Hamelin and Marianne St-Gelais, and these Games represent something of a changing of the guard in Canadian short-track speed skating.

And the medal haul from 22-year-old Boutin and 21-year-old Girard shows that for Team Canada in short-track — the kids are alright.

While three-time gold medallist Hamelin and three-time silver medallist St-Gelais are trying for more hardware of their own, they have each been warmly supportive of the younger athletes on the short-track team.

St-Gelais was among the first to congratulate Boutin with a hug on the side of the track after her race. Girard jumped on to the padding around the track after his race to meet with Hamelin, who gave him a playful smack on the helmet as congratulations.

“I will share my medal with him,” Girard said after the race of his friend and teammate, Hamelin. “He worked so hard for me to be what I am right now.”

But the hard work isn’t over yet. All of them — St-Gelais and Boutin on the women’s side, and Hamelin and Girard on the men’s — will get a shot at more medals together next week in relay races.

City staff recommend developer’s proposal for former Bayview School

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Community has long fought proposal, still has some concerns

An aerial view of the former Bayview School site. (Google Maps)

City of Ottawa staff are supporting a proposal to build a retirement community on the site of the former Bayview School.

In a report to the planning committee, staff recommended the approval of a mix of low-rise townhomes and a six-storey apartment complex for a total of 623 units.

The city’s land development agency — Ottawa Community Lands Development Corporation — sold the four-hectare parcel to Canoe Bay Developments Inc. after a request for proposals was issued.

“We all recognize that progress has to move forward, so we want to be good neighbours [and] in favour of the development,” said Craig Searle, president of the Riverside Park Community Association.

“Just not some aspects of the development.”

Searle said he is concerned about the impact the development would have on the community of Riverside, particularly the traffic and noise.

“Everybody in the community that I’ve spoken with are tired of the process, they’re disillusioned with the process,” he said.

“We feel betrayed, we feel unheard. We’ve been fighting this fight since 2007.”

According to the report, two public meetings were held in 2017, with over 200 residents attending each session.

One of the main sticking points has been the project’s proposed density. Currently, at the city, there are no clear parameters around the issue, which Searle believes has made defining the project’s sustainability difficult.

“The city does not have a definition of low, medium or high density,” he said.

Concept plan was a guide

Searle noted that the project looks very different today from what was initially proposed in the concept plan.

However, the councillor for the area said the plan was simply a guide to help shape the proposals and without it, there would have been much larger project proposals brought forward.

“Nothing matched the community-led concept plan by 100 per cent,” said River Ward Coun. Riley Brockington.

“There were no exact matches. Every bid received deviated in one way or another. And that’s to be expected,” he said.

“If there was no concept plan you would probably see submissions that were much more dense and much taller. Absolutely much taller,” he said.

The impact of increased density

Brockington said while he understands the project’s density is problematic for many residents, he’s not sure where the boundary should be.

“I don’t know what the ideal number is,” he said. “The height, in my mind, is reasonable, but they have a lot of units in them and I think people are looking at the number and saying that’s a lot.”

Brockington believes the fact the development caters specifically to seniors alleviates many of the community’s concerns about the negative impact of the project.

“They don’t have wild parties,” he said.

“When you look at statistics about people who live in seniors’ residence, they don’t drive cars, they’re not going to be swamping the streets with traffic,” said Brockington.

“They’re going to be fairly self-contained.”

Height concerns

The developer has also proposed a three-storey strip — one floor of commercial tenants topped with two floors of apartments — along Riverside Drive.

Searle said heightening the building would ruin the existing view of Mooney’s Bay, which is central to the community.

“That’s one of the best views in the city, overlooking the river,” he said.

“It’ll block that view.”

Brockington agrees and said he would be advocating to remove one of the apartment floors. “I will be absolutely, without hesitation, be moving a motion to, at the very least, chop off one of those floors.”

Meanwhile, Searle questions the usefulness of the commercial space given the difficulty other properties in the community have had.

“There is a commercial retail establishment maybe half a kilmometre away, to the north, and it has many unused [lots] now that they can’t rent out,” he said.

The idea of a commercial space with facilities like a doctor’s office, pharmacy and coffee shop has garnered some community support said Brockington.

“The commercial strip on Riverside that was added would allow services that the community would need.”

The report by city staff to the planning committee will be presented on February 27.