Video transcript
The benefit of dividends is that during periods where stock prices fluctuate up and down but not really form a trend upwards or downwards, companies with strong fundamentals, they can still continue to pay out if not even grow the dividends for shareholders.
How are you navigating the “tariff on, tariff off” environment?
So it's not really about what any individual set of tariffs is going to be, when we're looking as portfolio managers, it's to understand, is this a strategic industry? Are there strategic implications that will mean that this sector or subsector or value chain gets caught up in the whole brinkmanship and the new era that we live in today? And that is our goal at the core, is to avoid those hotspots and stay away from that entire conversation altogether.
Have you made any changes to the portfolio in response to U.S. President Donald Trump’s policies?
We've actually made some changes to the portfolio, not necessarily because of Trump 2.0 or what's going on with the U.S. administration in general. It's shifting to where we see the opportunities in the short, medium and long term. So we've been adding more to European industrial companies more so than we have in years, and that's not because of Trump, but that's because of where we see the global opportunity set shifting as the strong performance in the U.S. market over the last decade has been broadening out to other parts of the global economy.
Can you highlight a few recent names you’ve added to the portfolio?
So one of the names we've added to the portfolio because of its own idiosyncratic opportunity sets has been United Healthcare. So the stock has been on a multi-year relative underperformance that we think is a great opportunity to pick up more of the stock and average into what we think is a great long-term entry point. Another company that we own actually more in the Canadian market has been Enbridge, which is a great cash flowing utility-like company that has multiple years of organically internally funded growth ahead of it. So we've been buying more in Canada, buying more in America, and there are some European names as well, but that really focuses more on some of the tactical opportunities we see there.
Can you elaborate on how tariffs may impact your value chain analysis for Canadian companies?
Given the breadth or lack thereof in the Canadian market, there isn't a lot of idiosyncratic value chains to be seen here, but we can step back and really look at Canadian companies within the context of a North American or global value chain. Boyd Group is a company that we've followed for a while and they operate a chain of auto collision repair shops. Now, the vast majority of the damaged vehicles that they handle are referrals from insurance companies.
And when an insurance company decides whether to send a damaged vehicle for repair or to scrap it, the decision is impacted by used car pricing because the higher the used car prices are, the more insurance would have to pay to buy a comparable car. Now, in this case, Boyd might not actively be able to alleviate any tariff burdens, but there's certainly a company that will benefit from any new or used car price increases that will result from auto-related tariffs.
Why do dividend funds offer investors an especially attractive risk-reward opportunity in the current market environment?
The volatility index is on the higher end of where it sits historically, so there's certainly a lot of uncertainty that's in the markets today. And the benefit of dividends is that during periods where stock prices fluctuate up and down but not really form a trend upwards or downwards, companies with strong fundamentals, they can still continue to pay out if not even grow the dividends for shareholders.
Recorded on March 11, 2025. For definitions of technical terms, please visit iaclarington.com/glossary and speak with your investment advisor.
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