While earnings season is always a busy time, this one has seemed like a particularly active one. Between dividend increases and takeovers, there has been a lot to digest over the past few weeks. The small to mid-cap space has been where a lot of the action is at as well. Lets do an overview of where the action has been occurring.

Takeovers and Mergers

While there was a lot of takeover activity, much of it seemed to be concentrated around the 5i coverage universe. First we had TIO Networks (TNC) getting taken over by PayPal at what was a bit of a weak premium but a 30% return over three months and 127% return since we began coverage back on October 18, 2015. Next we had Waterloo based RDM Corp (RC) getting taken over at a 13.5% premium. While it looks a bit light, RC also operates in a bit of a slower growth cheque imaging business, where a large premium would not really be warranted. RDM returned 145% not including dividends from the time our rating became positive on the company. Finally, while not covered by 5i, Halogen Software (HGN) was also taken over at a 23.5% premium. The common theme here is small-cap tech companies.

Turning the tables a little, MacDonald Dettwiler (MDA) has reached into the US to buy DigitalGlobe for $3.1 billion US dollars in a cash and share deal. With the deal not expected to be accretive until 2018, and a share deal being done when MDA’s shares are already likely cheap any way you look at it, markets are probably not going to be overly thrilled with this purchase. However, for a patient investor, this acquisition could set the Canadian company up to be a leader in space systems, earth imagery and geospatial markets. 

Dividend Increases

Companies raising the dividend have been tough to keep up with but here is the list of companies (and the rate of increase) we have seen raise dividends so far this quarter:

Exco Technologies (14%)

Brookfield Renewable (5%)

BCE Inc. (5%)

Toromont (6%)

Polaris Infrastructure (6%)

Surge Energy (15%)

Manulife (11%)

Barrick Gold (50%)

TransCanada (11%)

goeasy (44%)

Maple Leaf Foods (22%)

Enbridge (10%)

CIBC (2.4%)

Stantec (11%)

CCl Industries (15%)

Leons Furniture (20%)

Magna (10%)

Royal Bank (5%)

Innergex Renewable (3.1%)

Chartwell Retirement (2.5%)

With roughly 50% of companies on the TSX reporting results and roughly 60% of these companies beating or matching EPS estimates (51% beat, 10% matched) the quarter does not seem too bad. Mix in some strong signals coming from the companies through dividend increases and interest from the US in the form of takeovers and investors may have reason to be a little optimistic on Canadian markets. One quarter is far from a trend but some of the gloom from a depressed oil market may just finally be clearing. Finally, while we love to see companies get taken over, it is often with a bit of reluctance, as usually this means another good Canadian company has been taken over and removed from an investor’s portfolio. While it is hard to imagine a situation where a small Canadian company would say ‘no thanks’ to an approach from the likes of PayPal, it is hard not to imagine ‘what-if’ that company had gone it alone and instead tried to be the acquirer.