Michael Simpson, portfolio manager at NCM Investments, shares his outlook on North American Dividend Stocks.
Michael Simpson, Portfolio Manager, NCM Investments
Focus: North American Dividend Stocks
Top picks: Cargojet, Jamieson Wellness, Lincoln Electric
MARKET OUTLOOK:
Markets in North America have been strong in the first nine months of the year.
The TSX is up over 21 per cent as of Sept. 30, while the S&P 500 is up 13.7 per cent.
Traditionally, September has been the weakest month followed by October. We don’t try to predict corrections, but we would not be surprised if the market had a small pull back before the end of the year.
Earnings and interest rates are driving the market. Many believe the Federal Reserve has just started to cut rates, while there are others who believe the U.S. economy is strong and does not need several rate cuts with the current unemployment rate at 4.3 per cent and with the U.S. economy expanding at an annualized 3.8 per cent rate in Q2 2025.
In Q2 2025, the personal consumption index rose 2.5 per cent. The debate will get clearer in the next few months, as we see the impacts tariffs are having on the U.S. vis a vis inflation and overall growth.
We may not have seen the full impacts of tariffs on imported goods, because there was inventory stocking, and initially some importers have absorbed part of the tariff.
In Canada, the Bank of Canada may lower rates two more times to help a more sluggish economy. Canadian inflation is running below the Bank of Canada’s target of two per cent at 1.9 per cent.
In terms of valuation, here is where Canada has an edge: The S&P/TSX is trading at 17.4 times forward (2026) earnings with a dividend yield of 2.38 per cent. This compares to the S&P 500 at 23.5 times forward earnings and a dividend yield of 1.16 per cent.
Investors in Canada get the home field advantage with a lower valuation, and a higher dividend yield. We track mergers and acquisitions, and over the last 12 months on the TSX there has been over 30 announced corporate mergers.
In fact, in the NCM Dividend Champions, three Canadian companies that were in my fund were the subject of takeovers: Parkland, Andlauer Healthcare, and Dentalcorp.
With the impetus of lower rates and most Canadian goods being exported to the U.S. with zero or minimal tariffs, we think the Canadian market will continue to perform well.
TOP PICKS:
Michael Simpson’s Top Picks: Cargojet, Jamieson Wellness & Lincoln Electric Michael Simpson, portfolio manager at NCM Investments, shares his top stock picks to watch in the market.
Cargojet (CJT TSX)
Cargojet is the leading air freight cargo company in Canada. They have over 90 per cent market share in the Canadian air cargo market. They fly out of their base in Hamilton to 16 cities. They have a very strong on time delivery rate of 98 per cent.
Cargojet also flies planes for customers like Amazon who supply the plane. They have contracts that guarantee a minimum number of hours. Key customers include Amazon, DHL, And Lauer Health and Canpar Trades at a forward price to earnings (P/E) ratio of 14.7, EV/EBITDA of 6.7 times and price to cashflow of 4.3 times with a dividend yield of 1.49 per cent and five-year dividend growth rate of eight per cent.
Over the last five years, Cargojet has doubled their revenue, and increased EBITBA from 150.8 million to 324.4 million yet CJT trades at a lower valuation.
Jamieson Wellness (JWEL TSX)
Jamieson Wellness is a Canadian company that develops and manufactures vitamins and mineral supplements. They have manufacturing operations in Ontario and the U.S. They produce such products as Tumeric, Magnesium and Iron Vegan Protein for athletes.
In the U.S., their products are sold under the youtheory brand, which targets a female demographic. Jamieson was founded in Windsor, Ont. over 100 years ago. Sales in China and Hong Kong are growing strongly.
Jamieson Wellness trades at 15.8 times forward P/E, and under 11 times EV/EBITDA. Debt is reasonable for the cash flow that they generate and have raised their dividend by 14 per cent over the last five years.
Lincoln Electric Holdings (LECO NASD)
Lincoln Electric Holdings designs and manufactures welding and cutting products. The company’s products include arc welding power sources, wire feeding systems, robotic welding packages, fume extraction equipment, consumable electrodes, fluxes, and regulators and torches used in oxy-fuel welding and cutting.
They receive 65 per cent of the revenues from North America. Consumables used in the welding process make up 50 per cent of revenue. They serve the oil and gas, power generation, shipbuilding, automotive construction, and other heavy industries.
The company has return on common equity of 37 per cent, return on invested capital of 20.7 per cent and a five-year dividend growth rate of 8 per cent. It has a solid balance sheet with debt/EBITDA at 1.2 times. It trades at 21 times P/E and 15.3 times EV/EBITDA. It is a play on reshoring and automated factories with AI Robots using automated welding.