Stock Market Series

Are All Canadian High-Yield Dividend Stocks Investable (Part 2)?

In the last post, we have investigated Altagas and Inter Pipeline to see whether they have durable competitive advantage or not  since they are Canadian high-yield dividend stocks.

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Let’s continue to where we left off.

TransAlta Renewables Inc (TSE: RNW)

TransAlta Renewables is a Canada-based company engaged in developing, owning and operating renewable power generation facilities. The company owns and operates over ten hydro facilities and approximately 20 wind farms in Western and Eastern Canada with a total installed capacity of approximately 1,140 megawatts (MW). In addition, TransAlta Renewables holds economic interest in approximately 140 MW Wyoming Wind Farm and approximately 420 MW Australian gas-fired generation assets, as well as over 270 kilometres gas pipeline.

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Unfortunately, I don’t think I would invest in TransAlta Renewable since its P/E ratio is too high.  If you have been follow this blog, you know that I wouldn’t invest in any stock that has a P/E ratio higher than 20.  Having a high P/E ratio means the company is OVERVALUED!

Peyto Exploration & Development Corp (TSE:PEY)

Peyto Exploration & Development Corp is a Canada-based energy company. The Company is engaged in acquisition, exploration, development and production of oil and natural gas in Western Canada. Its portfolio of assets includes exploration, exploitation and development opportunities located primarily in the Deep Basin of Alberta, Canada.

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Again, I would not invest in Peyto Exploration and Development Corp just because the P/E ratio is too high for me.

Vermilion Energy Inc. (TSE: VET)

Vermilion Energy Inc. produces oil and gas, and focuses on the acquisition, development and optimization of producing properties in North America, the Europe and Australia. In Canada, the company focuses on producing oil and gas  in West Pembina near Drayton Valley, Alberta and Northgate in southeast Saskatchewan.

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Likewise, the P/E ratio is too high (in fact, I think it is the highest so far).  As a result, I would not invest in this company.

IGM Financial Inc. (TSE: IGM)

IGM Financial Inc. is a Canada-based financial services company. The company’s principal businesses are Investors Group Inc., Mackenzie Financial Corporation, and Investment Planning Counsel.  The Investors Group provides a range of financial and investment planning services through its network of consultants across the country. Furthermore,  Mackenzie Financial Corporation is an investment management firm offering long-term solutions for investors and advisors, including RSP, RRSP, RDSP, and Mutual Funds.  Lastly,  Investment Planning Counsel provides personal wealthy management strategy for wealthy and high net-worth individuals.

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Just by looking at the P/E ratio, I think IGM Financial is investable because the company’s P/E ratio is lower than 20.  The next step would be to analyze IGM Financial’s financial statements and see whether the company is performing well fundamentally.

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Personally, I definitely would invest in IGM Financial. First of all, gross profit used in selling, general and administrative expense is low.  Second of all, the company has a high net income on total revenue.  Lastly, the company’s return on capital expenditure is low.

So should I enter the market and buy IGM Financial NOW?  Let’s compute the trading chart on StockCharts.com.

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As you can see, IGM Financial is on an upward trend and it is currently trading close to the upper Bollinger Band.  Therefore, it is not a good time to enter the market at the present moment.

In the next post,  we will finish off with investigating CIBC, Pembina Pipeline and CI Financial.  Please feel free to comment below! Catch you on the flip side!

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