Picking the Right Dividend Aristocrat Stock

November 22, 2021No Comments

Hello, and welcome to the Smart money, Dumb money show. And I am your host as usual Keith Richards, and I’m the President and Chief Portfolio Manager, and technical analyst at ValueTrend Wealth Management. Today, we’re going to address a topic that income-orientated investors should be interested in. We’re going to talk about dividend stocks. Now, in particular, we want to talk about what some companies call Dividend Aristocrats and Dividend Aristocrats are stocks that have illustrated the ability to, on a regular basis, not just maintain but increase their dividends over time. They are considered some of the better quality dividend-paying stocks. And we’re going to specifically look at the I-shares Dividend Aristocrats ETF, and that’s because it’s a pretty straightforward and simple ETF to look at and tear apart. It’s only got 10 names. So what I have done today for my good viewership is I have posted the charts of every one of the stocks that consist and make up the Dividend Aristocrat fund by I-shares.

So this will give us an idea of whether there are some individual stocks within that group that should be avoided and some that might be of interest to buy now or soon. See, one of my main concerns about ETFs and mutual funds, although you don’t see much in the way of mutual funds around anymore, the ETFs, the problem is that you’re buying a basket and that basket may be screened using their parameters such as in this case, companies that can increase their dividends. But at the same time may not take into consideration the current technical outlook. So you end up getting a basket of mixed-breed stocks. In other words, some stocks may technically look very favorable, and some stocks technically may look less favorable. So I’ve always believed in being more of an individual stock picker for things like this.

Now, when it comes to country indexes or specific sectors where things are pretty much the same, such as Canadian banking. Sure, not a bad idea to buy an ETF. It gives you the diversity and yet you’re also buying a group that more or less, tends to operate in the same way. This also can be applied to sectors that you’re maybe a little bit less familiar with or you know, just wish to trade a seasonal thing in which case ETFs are good. But when it comes to things like dividend stocks, I’m a bit more concerned about buying the gems and discarding the ones that look less favorable. Now keep in mind, dividend aristocrats are actually good-quality stocks. They’ve illustrated the ability to increase their dividends, but it doesn’t mean they’re going to go up after you buy them.

So let’s take a look. I’m going to share my screen and I’m going to go right to the first chart, which is that of the I-Shares Canadian Dividend Aristocrats ETF itself. You can see it’s been on a terror. I mean, who wouldn’t want to own that? Now one little feature I want to point out here and, you know, and you will have to excuse me, cause I have to lean forward. And that is, if you take a look at this chart, it’s building in the dividends. So if we were to apply a little underscore before the initial on stock charts, you’ll find that it slightly changes the look of the chart. And that’s because it’s subtracting the dividend from the price. Why Stock Charts does this, that is add in the dividends to its share price over time, I don’t know because it’s not a pure reflection of price.

So you do have to be aware of that. Now I’ve not done the underscore for every one of these stocks, but just as a heads up, whenever you’re looking at a high dividend stock, you might want to consider looking at the non-dividend built in version, which is simply putting an underscore before the initials of the stock. So let’s look at the components of the I-shares Dividend Aristocrat ETF.

So we’ll start with CIBC. And this is a premier bank in Canada. And what you’ve got here is that rapid arc up that we saw on the ETF and then a slowing trend now, but still higher highs and higher lows and above the 200-day moving average, no significant overhead resistance, looks like a pretty good play. So that’s, what I would call a favorable stock chart. Money flow, by the way, supports the move.

So this is the bottom pane here, which is basically the amount of capital flowing in on up days versus down days. And it gives us an idea of net positive or negative money flowing into a given stock. The money flows pretty positively for CIBC. We’ll look at Exchange Income Corporation and you can see that it was pretty consolidated for a number of years, but recently seems to have broken out. So that again is a bullish factor. In fact, the fact that it’s pulling back a little bit right now to its breakout point is a positive thing. We call that neckline breakout and that can be a good sign. So exchange income, not a bad-looking chart. Enbridge, which I disclose, we hold in our income platform.

Same thing, broke out to a new high, seems to be testing that so often a good place to be buying is on a neckline test.

So we’ve owned it for a while now. So we’re not necessarily new buyers, but the point is it’s not a bad-looking chart within the index. And it seems to be pulling back in a healthy way after a rapid rise.

Same with Fiera. So Fiera had a very, very long lid on it, literally going back to 2017 or so. And it looks like it’s attempting to break out. Now at this point, I don’t know that I want to call this a breakout. It really doesn’t seem to be consistently staying above that last high, which was around where it is right now, $11 and 30 cents or so. So I would like to see Fiera breakout higher because if it doesn’t, it could pull back into this 10 to $11 range. The money flow is positive on Fiera.

So that’s, that’s always a good thing. So we can, we can see positive money flow and a potentially good sign of the stock breaking up, but we shall see. So Great-West life, same thing. It had that massive rally that a lot of the dividend-paying stocks did. And now it seems to be consolidating. There’s a little bit of danger here though, because the stock does seem to be trending in the short term down. Now, this could be just a consolidation. It probably is, in fact, because there’s a good point of support that will come in here at around $36, but just keep in mind that so far, the trend is looking a little bit bearish. So this would be one of the stocks that I would be less interested in as far as a new buy position. Same thing with Keyera. Keyera is a pipeline.

And, there, you can see the stock is struggling right at its old highs, which if you look at it, these old highs go back to 2016. It really even during the pre-COVID era, it really had a hard time breaking the let’s call it thirty-one thirty-two, thirty-three dollar area, low thirty dollar area. So we’ll have to see if that happens, but so far it does seem to be failing, doesn’t it, if you look at the lower trends that we’re seeing right now in the short term. So again, that’s one of the ones that I probably wouldn’t want to buy as an individual stock.

Now Power on the other hand, which I will disclose we own in our income platform, Power is consolidating in a rectangle. It’s not making lower highs and lower lows. It is just kind of moving sideways. And that’s actually a pretty positive thing.

After a strong run, you need consolidations. So I think Power right now still looks pretty healthy and actually probably not a bad place for additional purchases if you happen to own it. It’s not oversold by any stretch, but it looks like it’s washing out some of its excess.

 

Pembina we own in both our income platform and our equity platform. It is coming into a level of resistance. It does appear to be breaking that, but it’s just on the early part of that. If it can break that, then I would expect it might get back to possibly as high as its old highs, pre-COVID high forties, especially with oil prices, being what they are. We shall see, but there’s no deterioration as you can see in the trend, it’s continuing to make higher highs and higher lows. And that’s why we own it, not just in our income platform, but in our equity platform, because we are seeing that there is potential for upside plus it pays a pretty nifty dividend.

I think this is our last chart, but we’ll find out in a second. The Smart Real Estate Trust has definitely broken an old resistance point. And you can see that point after many, many years broke out and you can see right at that breakout point it shot up. So that’s very healthy. Might be a little bit overbought right now, might pull back a bit, but this is a very, very good chart. In my opinion, I would be probably a buyer if it were to fall anywhere back around $31, which is where the 50 day moving average sits. Money flow of course has been very bullish on this chart. So all systems look pretty good for this stock. And we’re back to the beginning, which is the index ETF itself. As you can see that most of the charts were fairly positive, making new highs, and that’s why the index reflects that.

But my thoughts are that if you are like me and you like to pick your individual stocks, I’d probably look at the group and pick three or four or five of those 10 names that have the best-looking charts. I maybe think twice before buying into a stock that is about to hit significant overhead resistance and may fail. So just bear that in mind, having said that the ETF isn’t a horrible representation of the group. So thanks very much for watching. And I hope that helps the income investors out there who happened to catch this video. And we’ll be back next week with more growth-type ideas, which is typically the kind of thing I like to look at on this video series. Now, bear in mind as well that my bi-weekly blog has lots of new ideas that I throw at you every single week. And if you don’t subscribe to the blog and the video you can do so right on this website, you’ll see these subscribed buttons on this page. Thanks for watching.

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