Things are about to get even better for dividend investors. Plus, the latest bets against TSX stocks and decoding the market’s “mystifying” rally

Scotiabank strategist Simone Arel detailed some good news for domestic dividend investors in a Wednesday research report and provided reason to believe more lucrative income opportunities are on the way.

Ms Arel noted that the TSX’s year-over-year dividend growth rate increased by 9.5 percentage points from the first quarter of 2021. A total of 70 companies increased their payout to present this year, compared to 43 a year ago. Scotia notes that these positive numbers likely underestimate the upward trend in earnings, as they do not include instances where dividend hikes have been announced but have not yet started.

Analysts have raised dividend forecasts since the summer of 2021 and consensus expectations point to an increase of 8.7% in 2022 for the index as a whole and another 6.0% in 2023.

The additional dividends would increase the payout ratio – the share of profits sent to shareholders – to 41% for 2022 and 40% in 2023. Both figures are well below the historical average of 49%, leaving ample room for dividends. to climb even further.

Scotia’s strategy team believes that the current inflationary environment makes dividend payouts more important than ever. In a research note this month titled Revisiting the 1970s in the charts, Scotia highlighted the benefits of dividend growth during this inflationary decade. The TSX generated a simple annual return of 5.9% between 1969 and 1979, but investment earnings on the benchmark were a much more satisfying 10.4% once dividends were included.

So far, dividend growth has been centered on the energy, materials and financials sectors, but investors can expect the trend to spread to areas of the market where payout ratios are below the historical average.

— Scott Barlow, Globe and Mail Market Strategist

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actions to ponder

Tesla Inc. (TSLA-Q) When Tesla announced on Monday that it would seek shareholder approval for a stock split — thereby increasing the number of shares outstanding and lowering the price at which each share trades — the stock soared. soared as delighted retail investors piled in. Yet why, because there is no fundamental change in the value of a stock when a company completes a stock split. David Berman went in search of possible explanations.

PetValu Holdings Ltd. (PET-T) Pet Valu shares began trading on the Toronto Stock Exchange in June 2021 with an initial public offering price of $20. The stock price is now above $30, boosted by strong financial results and the trend of Canadians bringing home more pets during the pandemic. A dramatic increase in the stock’s dividend probably didn’t hurt either. The Globe’s Jennifer Dowty had a fireside chat with CEO Richard Maltsbarger about the company’s financial results, supply chain challenges and growth plans.

RF Capital Group Inc. (RCG-T) Shares of this financial stock rose nearly 900% on Wednesday morning – but the Contra Guys, who hold the stock, weren’t celebrating. The company just completed a stock split, so that had been in the cards. And RF Capital’s recent financial results and series of controversial corporate transactions point to more trouble ahead, as they explain.

The summary

TSX Short Selling: What Bearish Investors Are Betting Against

Short sellers have reduced their bearish bets on the direction of the Toronto Stock Exchange, reports Larry MacDonald, who details which stocks are seeing the biggest increases and decreases in short interest.

‘Mystifying’ rally in US stocks defies economic malaise

As a stunning rebound in US equities continues, investors are wondering how long the upside can continue in the face of a hawkish Federal Reserve, bond market recession warnings and geopolitical uncertainty. As Reuters’ Lewis Krauskopf reports, many investors are wary of the rebound.

Also see:

US yield curve steepens as investors focus on recession risks

Q1 Markets: Invasion and Reversal Shakes the World Order

The elusive bond risk premium misses its callback

Four years after “Volmageddon”, new volatility ETFs hit the market

Two new funds allowing investors to bet on stock market movements are set to launch this week, potentially filling the void left by the implosion of similar products four years ago. Reporting by Saqib Iqbal Ahmed of Reuters.

Dynamic Bitcoin Helps Crypto Market Surpass US$2 Trillion

As a dismal first quarter draws to a close, crypto appears to be on a roll. It has crossed the US$2 trillion mark and is proving surprisingly resilient in the global chaos.

Others (for subscribers)

Number Cruncher: Looking to diversify your portfolio? Here are 10 US small-cap stocks with earnings momentum

Wednesday analyst upgrades and downgrades

Tuesday analyst upgrades and downgrades

Wednesday’s insider report: The president is investing in this booming food infrastructure stock that grew 39% in 2022

Tuesday’s Insider Report: Eric Sprott invests over $3 million in this penny stock

Globe Advisor

How to play the impact of rising interest rates on the markets

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Ask Globe Investor

Question: I hold units of H&R Real Estate Investment Trust (HR.UN) in an account with the transfer agent of the REIT. In January, I received one unit from Primaris REIT (PMZ.UN) for four units from H&R as part of the Primaris by H&R spin-off. These new units were put into my account free of charge. I intend to sell the Primaris Units or transfer them to my Tax-Free Savings Account. My question is, what do I use for an adjusted cost basis?

To respond: If you refer to H&R’s fourth quarter earnings release dated February 14, you will find the following on page 7: [H&R] The number of units is expected to decrease by 27% following the split of Primaris. Conversely, the Unitholder ACB of the Primaris REIT Units issued on December 31, 2021 is initially expected to be 27% of the former Unitholder ACB of the Unitholders immediately prior to the Primaris Spin-off.

It’s understood? Let me explain it with an example: suppose the ACB of your H&R units was $10,000 before the spin-off. The ACB of your new Primaris units would be $2,700 (27% of $10,000). The ACB of your H&R shares would drop to $7,300 ($10,000 minus $2,700).

Another important thing to note is that H&R made a special year-end distribution of 73 cents per share, of which 10 cents was paid in cash and 63 cents was a non-cash capital gains distribution (also known as reinvested distribution name or “phantom”). Distribution). Investors should increase the ACB per unit of their H&R units by the amount of the non-cash distribution “prior to the allocation of ACB to Primaris REIT units,” H&R said.

I suggest you contact the transfer agent to ask why the base price of your Primaris shares is displayed as zero.

Finally, remember that whether you sell your Primaris units or transfer them to your TFSA, you will have to pay capital gains tax if the market value of the units at the time of the sale or transfer is greater than your ACB.

–John Heinzl (Send questions to [email protected])

What’s up in the coming days

Brenda Bouw finds out what fund manager Sadiq Adatia has been buying and selling amid this month’s volatile markets.

Click here to view Globe Investor’s earnings and economic news calendar.

More Globe Investor coverage

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Compiled by Globe Investor staff

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