I have a couple of questions about the noted companies - please deduct as you see fit.
I'm interested in dodging direct tariff risks, and it occurs to me that these two names fit that criterion because of their all Canadian business models. Do you think that conclusion is sensible?
Are there material differences between them leading to a clear favourite over the next 5 years? I note the SIA dividend is substantially larger than that of CSH, but would it be reasonable to assume this will be offset by greater share growth by CSH, over time?
And finally, would you consider one (or both) of them appropriate for a RRIF?
Thanks 5i - I look forward to your thoughts. Peter
We think it makes sense to avoid companies with a high degree of exposure to US markets if one is looking to minimize the risks from tariffs.
In general, a company that pays a higher dividend will have less available cash for other purposes such as share buybacks or reinvestment in growth, both which when used right, can be accretive to shareholders. Thus, it is a matter of how well the capital is deployed.
Both names are around the same size (CSH.UN at a $3.2B market cap and SIA at a $1.0B market cap). CSH.UN is expected to see nice sales growth next year, and historically it has a stronger total return (share price appreciation plus dividends) than SIA over the past five and 10 years. CSH.UN is priced at a higher valuation, but we feel this is appropriate given its stronger overall returns and margin profile.
We would consider both of them appropriate for a RRIF.