On Thursday, the market had its first significantly positive day of the new year. The S&P 500 was up 1.7% and Toronto was up 1.4%.
J.P. Morgan’s earnings were better than expected which may bode well for Wells Fargo’s numbers due out on Friday morning.
Most of the stocks on our list were up today.
However, the rate reset preferred shares were down.
Similarly, Boston Pizza was down 2.1% to $15.97 to yield 8.1%. This decline was on about triple the normal volume. Possibly someone was very eager to unload a larger position. It goes to show that stocks can go down more than would seem logical. Again, this is a “top line” entity that passes through a portion of the franchise fee. The Distributable cash is driven by same-store sales. If same store sales were to fall 5% the distributable cash falls by very close to 5% (and vice versa). I had expected that same-store sales would be flat to down slightly in Q3 but they rose 2.6% despite weakness in parts of Alberta. Certainly same-store sales could have deceased in Q4. Some stores in Alberta will have suffered. On the other hand there may have been menu price increases. In 2016 I don’t see evidence yet that we should necessarily expect a same-store sales decline. Again, Alberta will be weak but I would expect the rest of the country to do well and there would likely be some menu price increases. As noted previously, there has been insider buying. So, while market sentiment can drive the price down, the distributions per unit do not appear to be at risk of a decline. The current unit price would appear to be pricing in some distribution shrinkage rather than any growth. I could be accused of over-doing it but I bought more BP today.
For most companies there will be no insider buying during January or until the company reports Q4 earnings. Generally, insiders are prevented from buying from the end of each quarter ungilt he company reports earnings. However, Canadian Western Bank is in the midst of Q1 and so its insiders are allowed to buy this month. I noted that two insiders had bought shares in January. Yesterday another insider bought 500 common shares and 500 preferred shares. That is not a large amount of shares at all but it does indicate confidence.
TransAlta, a company not on our list but which I keep an eye on is out with news that it is taking certain actions including “revising” its dividend. I suspect they mean lowering. This is a highly speculative and profoundly poorly managed company. But at the recent share price it may be worth a speculative position. I would think the lower dividend might be good news for its pref shares since this means less cash out the door.