The Canadian Investor - BCE Finally Pulls the Trigger and Slashes its Dividend

Episode Date: May 15, 2025

In this episode, we break down the temporary 90-day tariff pause between the U.S. and China, what it could mean for markets, and why it might not last.  We also dive into BCE’s massive dividend cut and new growth-focused partnership with PSP Investments. Plus, we unpack UnitedHealth’s stunning 50% drop in just over a month, Goeasy’s soft quarter and what it signals about the subprime lending landscape, and Franco-Nevada’s blowout results amid soaring gold prices. Tickers of stocks discussed: FNV.TO, GSY.TO, BCE.TO, UNH  Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own safety goals, don't be surprised when there's a cycle. If there's uncertainty in the markets,

there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome to the Canadian Investor Podcast. I'm here with Dan Cant. We are back for a news and earnings episode. Should be a fun one. Still lots going on, not only on the earnings front, a little bit on the trade front. It's also the first episode that you'll be hearing our new intro. So people, hopefully you enjoyed it, you just heard it. Feel free to send us your feedback. It's me that did the mastering, the audio mastering behind it. Took a little longer than I thought, but I think the results came out pretty good.

Yeah, sounds pretty good. You're a natural. Oh, thank you. And I had to, we had to redo it because of course the old one was mentioning Brayden, who's still going to be there once a quarter, maybe a bit more often depending if there's some topics that are really scratching his herds. So I wanted to make sure people don't forget about him. So I inserted a clip of Brayden on top of Dan and I. But no, it should be, hopefully people like it. I thought it was pretty good myself.

So let's get started here. Like I said, lots to talk about. The first thing, of course, the elephant in the room that keeps delivering, I guess. So the US-China tariff pause. So the US has agreed to lower tariffs on Chinese imports from 145% to 30%. So it's a pretty significant decrease obviously here. China also agreed to reduce tariffs on US goods from 125%

to 10%. The reduction is for a 90-day period to allow a window for further negotiations. There were a few concessions that were made, including China resuming Boeing aircraft deliveries. The US also reduced the de minimis tariffs applied on low-cost Chinese goods under a certain value. Sector-specific tariffs such as auto, steel, pharma tariffs still apply. Scott Besson, for those who are not familiar, he is the US Treasury Secretary and was very involved with these negotiations, reiterated that the 90-day reduction is a temporary measure and that higher tariffs could be reinstated if there is no permanent agreement reached during the 90-day period. The day following the news of that 90-day

tariff reduction, of course course markets were up across the board. I think the S&P 500 was up around 3% and the Nasdaq was up close to 4% if I remember correctly. It was up decent amount yesterday so we are recording this on May 14 so on Tuesday the markets were up as well not as much. Now if you bought the dip, good for you because it's looking pretty good right now. I know you did make some purchases then and I'm assuming you must be feeling pretty good about those. Yes, I got a little bit lucky. Made some purchases back in like early and mid April and yeah, it's been, I mean, I still have a decent amount of cash, but yeah I mean the S&P the Nasdaq was down 21% on April 8th

And it's now getting pretty close to break even on the year. It's been a definitely a V V-shaped recovery. It's yeah. Mm-hmm. I mean it's this does give him a bit of more Room to come to a deal, but as he said it's kind of just a 90-day I mean he seems you know to love throwing out these delays kind of to try to get something done and hopefully it does. Yeah and I deployed a little bit of capital mostly I bought a bit of Canadian natural resources during the dip I still think there there's still gonna be a lot of volatility so I think

people still have to be careful here. We don't know how long this will last. So this 90-day reduction or temporary pause, whatever you want to call it. We don't know if there's going to be a permanent agreement made. Trump is notoriously unpredictable, which creates a huge amount of uncertainty for businesses and consumers. A lot of companies are reducing guidance on macroeconomic concerns. I think we've seen that quite a bit this earnings

season. Thankfully, earnings have not started to be too impacted just yet, but I've been seeing some victory laps and it's kind of funny that people don't really understand how businesses actually work. Because there's people taking victory laps not figuring out that if you're a retailer, for example, you're buying stuff 66 to 9 months in advance. So right now, retailers are actually making orders or placing orders for the holiday season. So a lot of the stuff that's being sold right now, as previously been ordered six to nine months ago, so a lot of these items still don't have the impact of tariffs on. And of course businesses that needed to make purchases,

whether it was retailers or other type of businesses that needed to buy whatever it was for their operations, they were seeing the potential tariffs. So a lot of business kind of brought in, kind of stocked up upfront, increased their inventories so that they would be safe for a little portion of time if tariffs would go on. So that's just to say that I think markets are still a bit too optimistic right now.

I did a recent, I just started searching a little bit in terms of what the guidance was for 2025 for the S&P 500 as a whole. So what analysts were predicting and these big kind of projections and most of them are still predicting an increase of five, I would say five to 10%. So high single digit increase in earnings this year, which to me is pretty out there. Maybe they will end up being right, but a lot of them are basing it on what came out of Q1 and I find that hilarious because a lot of the stuff in Q1 is still not seeing the impact from tariffs.

So there's a bit of disconnect I think right now with the markets and analysts. I hope things continue trending well and the impact is minimal but I do fear that there's gonna be a much bigger impact that we'll start seeing in Q2 and Q3 and the uncertainty will definitely prevent some investments to happen. Like this is a 90 day thing. Like it's very hard for businesses to plan when there's just still so much uncertainty at best and saying like, well, we may come back to higher tariffs. There is no guarantees. So if you're a business owner, this does not change much. You're not making large capex

based on this because you need more certainty. And this is definitely not providing any. Yeah. I mean, there is going to be a lot of companies that are pretty much front running these tariffs to try and reduce the impact of them. So you're not really gonna see it on the income statement yet in terms of actual results. I mean, the conference calls are actually where you get the best idea of a company's overall impacted tariffs as well.

But I mean, hopefully the market is being pretty optimistic, but I mean, 90 days is a pretty decent size window for negotiations. I mean, I would imagine that the U.S. is definitely going to aim to get what they want here, but at least they have three months to do so. It's kind of interesting. I went, I bought Cargo Jet, like just kind of on the basis that these tariffs would kind of interesting. I went, I bought cargo jet, like just kind of on the basis that these tariffs would kind of linger. And you know, they're coming to a deal here and even then cargo jets going up quite a bit.

I mean, it's an interesting situation right now. I mean, I'll take it. Yeah, yeah. I like it when the markets go up. Yeah, me too. Like I'm not complaining because overall my portfolio has done pretty well. For other reasons.

A lot of it obviously I have a pretty big allocation in Bitcoin and gold even though it's down a bit. In the past few days it's still been on a tear for the last more than a year now so I'm not complaining. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers zero dollar commissions on stocks and ETFs. But Questrade isn't just about commission free trading. You can also get USD accounts,

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or making active trades. Don't miss out. Start trading commission-free stocks and ETFs today. Visit questrade.com to learn more. Between meetings in Toronto and conferences in Vancouver, I'm not home as much as I'd like. So I've been thinking while I'm off enjoying someone else's Airbnb, why have I not put my own place up on Airbnb to earn a little extra income and help me pay for the trip with Airbnb's Local co-host network. I can find someone to handle everything bookings guest support even the cleaning

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for more. We'll move on here. Enough about tariffs, which is kind of hard to avoid if you're investing. It is what it is. of hard to avoid if you're investing. It is what it is. You have to pay attention. You have to understand what's happening here. Now BC finally announced that it was cutting its dividend. So like we had been saying for a year and a half, that's something they should have

done. It finally happened. There were some other announcements that were made on the call. I'll talk a little bit about the results but mainly the two big announcements. I think it's a big thing. So the first thing is before I get to the dividend cut, they mentioned they had a new partnership with PSP Investments. PSP Investment is one of Canada's larger investment boards. It manages money for public service pension plan. So public service employees, the PSSA that it's called, the Canadian Armed Forces Plan, and the RCMP

Pension Plan. It also manages some smaller ones, but those are the big ones it manages. It has about $244 billion in asset under management. PSP will help BC fund their US Fiber expansion. For those who don't remember, BC announced that it was going to acquire Zipley, which is on the West Coast in the US to expand in the US. Their reasoning was that Fiber is still under-penetrated in the US, and that's something that they see as a growth plan.

BC will own 49% of the partnership while PSP will own 51%. BC will keep 100% stake in Ziply which was the acquisition they did in the fall. Like I just mentioned, the partnership will be for future growth. PSP has agreed to commit up to $1.5 billion USD toward future growth. Ziply currently has about 2 million customers location while this new partnership apparently opens the door to an additional 6 million customers. So it is an interesting thing. Before I get to the dividend, what are your thoughts on that? Because if we remember they, I think they had sold white, they're staking MLSC to be able to make this acquisition? Yeah, they well, I mean, it just kind of seems like a complete mess overall. So they like they sold MLSC, but they they said that was to kind of fix up

their balance sheet, pay down debt, things like that. But they would have like this acquisition happened. I think it was like three weeks after they sold MLSC. So they would have had an idea they were gonna make this when they sold MLSE and they didn't tell anybody that they were gonna be doing this. They said they were saying it would be debt reduction, right? Yeah, but I mean, these types of deals,

I think it was for $5 billion or whatever. These don't just come to fruition in a three week period. They would have known this. And then it kind of seems like when they acquired Ziply, they were talking about the future growth of fiber in the US and how this is going to be a great acquisition in that regard. And it just kind of seems like they kind of realized they don't have the money to actually fund the growth. So they had to sell off half of that growth for one and a half billion dollars. I don't know if like PSP would own I don't know how like what the element of growth means like if they would own

the assets as well or they just have some sort of agreement in terms of you know the the earnings from that but I know that BC yeah it'll own all the previous assets for the company and then moving forward PSP will get majority share of that growth, which is, I don't know, it just kind of seems like they just didn't, they realized they didn't have the money to actually fund it. So they had to go seek, they had to sell off half of that growth for, and I mean, $1.5 billion, especially in the telecom sector, that doesn't seem like that much money.

No. Like building out these fiber networks, it is not a cheap ordeal. Yeah. And I mean, I listened to part of the call just for the opening part there, just to see what they had to say. I really searched for the dividend part because I was interested to see what they had to say on the call regarding that. But I don't know if they mentioned it.

I assume that they would not disclose it, but it feels like they were probably realizing that there was not a lot of appetite for their debt if they did not start getting their balance sheet in order. That would be my suspicion is that they probably started seeing that look, we have a lot of debt to refinance and there's just not a lot of demand and if we get to refinance it and don't change things we're going to pay in a stock like a massive amount in interest. Where I'm sure they would be able to get financing it just would come at a much higher cost. So I think they realized that, that they needed to reduce the debt,

which is what they're saying they're doing with the dividend reduction. That's a big part of what they're doing. So they announced that they'll be cutting the dividend from 3.99 a share on an annual basis to $1.75. So it's more than a 50% cut, which is when we had last talked about it that's kind of what I was advocating even like a 60% cut which is not far from there

would make a whole lot of sense it would allow them to pay down a decent amount in their debt and potentially even fund some more growth project while focusing on the debt. It's supposed to be affected the new dividend payment as of the July dividend payment. They said that this was due to significant changes in their economic and operating environment. And this is just a whole lot of BS right here because yes, it's a more challenging environment. Of course, there's less, they mentioned there's less immigration, less population growth, which is definitely putting a bit of a damper on their growth. But this has been an issue for quite some time and I'll show here their payout ratio. It's nothing that's recent here.

So I'm showing here since 2015, basically I have two things. So I have the interest payments, which I've just ballooned. Interest payments in 2015 were about 900 million. Now they've ballooned to 1.7 billion in the latest years. And then if you look at the payout ratio, that's the payout ratio in terms of free cash flow I mean, it's been an issue since 2021 and 2021 population growth was just through the roof 2022 as well So what they're saying that changing macroeconomic statements macroeconomic conditions Sure, if you won because the payout ratio got even worse. So you're looking at the payout ratio essentially 100% in 2021, creeping up to 102% in 22, 23 was 103, close to 104% and then 24 was 117%. When you get to 99% you're not like, there's an issue with

your dividend and the fact that they're trying to blame that on the economy and the macro economy and things just changing because of for example Population growth I think this is just like terrible management and they must think Shareholders and investors are just completely stupid because it doesn't take very long here You can just pull out the data and you look that it was a problem That's why we've been on this case for so long is because it was it was so obvious I mean interest expense kept increasing Revenues were stalling and the payout ratio was through the roof. Like it's not rocket science

Clearly anyone with half a brain could have seen this Yeah was they had I can't remember what it was. It would have been in 2023, I posted a chart of their free cashflow per share relative to their dividend paid. And typically the company dips, like sometimes they do go over 100%, but there's always typically been recovery.

Like the company never really went, I believe the last time they had two consecutive years of over a hundred percent free cashflow towards the dividend was during the financial crisis. After that, they would periodically have like a one year period where, you know, it would be over a hundred percent and then it would recover. But in 2022 and 2023, that was like the first time that this company went multiple years without being able to cover it. And that kind of signaled the problem back then. And I mean, yeah, there's only so much you can do before there's just not enough money to pay it.

And I think in regards to the dividend, like with Ziply, I think one of the main reasons, like you mentioned, one of the main reasons I think they probably sold off half that growth is because if they were to go and cut the dividend, which, you know, the vast majority of people own this company for the dividend, it's pretty much a bond proxy. Really, it doesn't, like it grows one or two percent a year, but I think if they were to have cut the dividend and Then not sold that stake in Zipley and then started utilizing, you know taking out more debt to fund that Fiber acquisition. I mean, I don't think investors would have liked that cut the dividend and start tacking on more debt to build out that fiber I mean people who own BC they want that return they want out that fiber. I mean, people who own BCE, they want that return. They want their share of the earnings returned to them. So I think that creates an element as to why they sold off half of their

growth in that. But I mean, this was a long time coming, I would say. I mean, especially when we look to 2021, what were interest rates like free, zero, next to zero, and they're still hitting 99%. I mean, during probably one of the best environments you could ask for in terms of a telecom. And it's still at 100%. So in 2022 and 2023, when rates jacked up, it got to the point where it was just, it was unsustainable. And even back then they were still growing it. Yeah. They only, they only stopped the dividend growth. What was that?

Like six months ago or something. And that's kind of, that's the number one sign for a struggling company in terms of income. I mean, you see that dividend growth slowing, slowing, slowing. Eventually it stops. I mean, the next, the next step is almost always a dividend cut, especially when this company, they haven't really grown. They've actually shrank.

There's so much competition in this space right now that they just can't grow earnings. Yeah, it's just a bad management team. I think there's just no other way to put it. Look, it was so easy to see. They ended up doing it, but to put it. Like look, it was so easy to see they ended up doing it. But think about it, if they had done it like three, four years ago, they could have saved so much money, been in such a better space. I mean, it's not yesterday that it's that high. They just did not give themselves any room to maneuver. That's why I'm very critical. I think the company now is in better shape going

forward because of this. But I think it'll be in the better shape going forward because of this, but I think it'll be in the best shape when they get rid of this CEO and this most of the board members at this point the board members are enabling this CEO and I have no idea why anyone would want to own this company with and have any faith in this management team. That's just my opinion. You can disagree with me. That's completely fine. They said that their new payout ratio target would be between 40 and 55% of free cashflow, which, okay, like I guess they're aware

of that free cashflow payout ratio is a thing. I'm actually surprised. Yeah, I'm surprised that they actually knew that was a thing, but they're also eliminating the dividend reinvestment plan, which they had announced a couple quarters ago. I think it was just a last ditch effort to save the dividend.

Encourage people to just reinvest in the company by the drip plan and giving them a discount. Clearly probably didn't work all that much and people that did that plan are looking at some nice losses since then. In terms of results, it wasn't great. Revenues were down 1.3%. They said, again, it was a result of intense competition and macroeconomic uncertainty. Net income was up 49%, but largely due to a one time gain. The average revenue per user for cell phone was down. They lost close to 10k postpaid cell phone subscribers compared to a gain of 45,000 last year, which they attributed to slowing population growth. They grew their high speed internet subscriber base by close to 10,000, but that was also a significant deceleration from last year, which was 31,000. So all in all, I mean, not that great.

It's obviously a challenging environment, but it all comes down to this, right? Like, and I think this is a takeaway that people can take. If you own BCE and you're facing the dividend cut, like, hey, look, I'm sorry you're in that spot. I know that sucks, but at least learn from this because you can learn from this for other investments as well. And I've been pretty critical for airlines as like not only BC, but airlines as well. When times are good, like you really should look at management teams, like just shoring up the balance sheet,

making sure they're in a good position, not try to just get some short term gains for whatever reason it is, put the company in a good position so when things turn around and you're facing slower population growth like you are right now, you're actually in a better spot and you can use that as an opportunity potentially with making acquisition because there are certain types of asset that could be attractive to BCE that may be on sale because it's a more difficult time. So that's my two cents.

I've been very critical of this management team will continue honestly until basically they're let go and they put a new management team in because you can't preside over this kind of stuff and have confidence of your shareholders. That's just my thoughts. Yeah. Yeah. I think I had mentioned a few times that I think when they cut the dividend, they'll actually perform quite well. But I think with the way they've mishandled this entire Ziply situation, it's kind of difficult to judge whether or not you know that ownership of MLSC would have been better than owning half of the growth of Ziply like the fact they had to sell that asset off which I don't think produced much cash flow for the company but also was something that like I mean those sports teams had gone up a crazy amount over the last while but I mean this it doesn't look

good. Like I don't understand why they made the acquisition. They probably knew that they didn't have the money to grow it because I would imagine if they knew this was going to happen when they acquired the company, they would probably state that they were looking for a partner to fuel the growth where they didn't. So I mean, this kind of seems like a last minute thing. And it just kind of seems like they've done literally everything wrong imaginable over the last while. I mean, like you said, I think if they, and they said, I think they mentioned on the conference call that they, they didn't want to cut the dividend because they know their shareholder base. Like they know that people just own this thing for income, but that doesn't really mean you can, you know, you don't have the money to pay it. Shareholders. I mean, I would say most shareholders knew a lot of people were definitely head in sand here, just kind of, you know, thinking that it was going to recover. But I mean, if they cut the dividend, there's a lot of people who said if they cut the dividend, the stocks going to bomb. But I mean, if they cut the dividend when the stock price was, you know, 55 bucks in

late 2023, it probably drops to what? 40 bucks and then maybe starts to recover. Whereas now we're sitting at, you know, $29 a share. It's just taken an absolute. They'd be in much better shape. Yeah, they'd be in much better shape. I think they'd be in better shape. Yeah, for sure.

I think there's no doubt about that. Maybe they could still have made that Zipley acquisition and have kept MLSC. So, because they would have been able to reduce their debt and their interest payments too. But enough about BCE, not to drag that on for too long. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers

zero dollar commissions on stocks and ETFs. But Questrade isn't just about commission free trading. You can also get USD accounts. So I avoid forced currency conversion fees when trading US stocks. Plus, get access to their advanced edge trading platform available on desktop, web, and mobile. I've been using Questrade for many years and so has Simon. And their platform makes trading seamless whether you're managing a long-term portfolio

or making active trades. Don't miss out. Start trading commission-free stocks and ETFs today. Visit questrade.com to learn more. stocks and ETFs today. Visit QuestTrade.com to learn more. Between meetings in Toronto and conferences in Vancouver, I'm not home as much as I'd like. So I've been thinking while I'm off enjoying someone else's Airbnb, why have I not put my own place up on Airbnb to earn a little extra income and help me pay for the trip? With Airbnb's local co-host network, I can find someone to handle everything. Bookings, guest support, even the cleaning. It's a simple way to make extra money while I'm traveling, without the hassle of hosting

it all myself. If your place often sits empty while you travel, it might be time to let it work for you. Find a co-host at airbnb.ca forward slash host. It's the small things that make us Canadian. At Beemo ETFs, all of our tickers start with Z. That's right, Z, not Z. From ZSP to ZEB, we know how to build solutions for the Canadian investor So the next time you invest in ETFs consider a Zed instead

Visit bimo ETFs calm for more Let's move on you want to talk about United Health and the little drawdown that they're seeing a little yeah Yeah, so this isn't really earnings because they reported earnings a month ago, but it came out with some pretty notable news yesterday that I figured would be worth covering because I mean, this is a mega cap stock. At one point it was, you know,

it was expected to be probably one of the first trillion dollar healthcare companies in the US and it's gotten obliterated over the last month or so. I think it's down 50%. And I mean, this is kind of a, a, a pretty, a good example of how, you know, things can change very, very quickly. When it comes to individual equities. I mean, when we look back at, yeah, April 11th health United health was around, around $600 a share us dollars. And,

and I believe what is it trading at today? 315. So yeah 47% drawdown. Yeah it's down quite a bit and what started the initial drawdown was actually when they reported earnings so they downgraded earnings and I thought this was pretty crazy at the time but obviously I mean a lot of people you you know, it was kind of justified, I guess. So it downgraded its earnings guidance by 10%. And I think the stock fell by 30% on that news. Like it was crazy. It just fell like off a cliff. And they had mentioned that utilization rates for its services are, this was back when they reported earnings.

They mentioned that utilization rates for its services are more than double what it expected and that higher medical costs are ultimately dragging on earnings. So this is a pretty much a health insurance play in the United States. So, you know, when you're coming in regards to insurers, you know, money comes in in the form of premiums and money goes out in the form of claims. So obviously when you have higher claims volume, you know, when you're coming in regards to insurers, you know, money comes in in the form of premiums and money goes out in the form of claims. So obviously when you have higher claims volume, you know, combined with, you know, not only are you paying out more in claims, but those higher medical costs, I mean, I can no doubt

have a, have a big drag on the business. So the earnings were relatively rough, but it got even rougher yesterday. So the company's CEO, Andrew Witty said that he would be stepping down. And this isn't like an end of the year thing. Apparently he's just done immediately. And some might be confused with this situation because of, you know, the, obviously the unfortunate event of the United healthcare CEO getting murdered. But this is a different company.

So Brian Thompson was the one who passed away was the CEO of United Healthcare, which is kind of the health insurance portion of the business. Andrew Whitty is the CEO of the entire business. So he's stepping down immediately, which I mean, typically when you get somebody who steps down immediately, there's probably something else going on. It was probably, you know, not, you know, maybe a forced step down. Or maybe he just wants to get the hell out of there. And it's possible. That's I've, you know, that's been known to happen where you get like a pretty, pretty

high roll, whatever it is. It's a lot of people have said it's happened to Fed before, if you're thinking about a couple decades ago, but when you have the head of an organization seeing that things are about to get pretty crazy and potentially going down the drain, they're like, okay, see ya. I think I'll just walk into the sunset

and enjoy my retirement. Yeah, he said it was for personal reasons, but. Yeah, I think I'll just walk into the sunset and enjoy my retirement Yeah, he said it was for personal reasons, but yeah, it's always I don't know Maybe like there's possibility that something actually happened, but it's just kind of weird that He just left he's just gonna step down right away Like you've seen it with Berkshire like Buffett end of the year, you know what I mean? Like he's stepping down, but he's gonna you know, it's not gonna be an immediate transition I don't think he's end of the year. You know what I mean? Like he's stepping down, but he's gonna you know, it's not going to be an immediate transition. I don't think he's end of the year. So another thing they came out with yesterday, they kind of lumped this in with the with the CEO leaving is they just suspended their guidance

outright. So they issued their guidance a few quarters ago, I believe they were expecting like, I think it was around like $30 a share 29 to $30 a share in earnings that year. Then they go down and they say, okay, we have to guide lower. We're going to earn 2650. And then, you know, a month after earnings, they come out and they just cut it immediately. So they just slash guidance. And we did mention that there would probably be a lot of companies slashing guidance in this environment because of tariffs,

but this isn't really a tariff related issue. I don't think. I mean, I guess to a degree in terms of medical costs, it could be to a certain extent, but I don't think like this is just a company that really has no idea what's going to be going on moving forward. And they do say that they're going to sort things out and they should get back to double digit growth in 2026. And I mean, in addition to this, like these are just strictly operational issues, but you do have Trump demanding medical costs and drug costs come down.

So that sort of uncertainty might have contributed to the fact that, you know, they suspended their guidance. And I mean, as I mentioned, it's pretty rare to see a mega cap company trade 50% in, you know, in under a month. I mean, I can probably think of something like maybe Tesla would have that sort of drawdown, but I mean, you typically wouldn't see any, especially like a company like this. Yeah, I do tend to lean towards them coming out of this on top. I mean, this is a gigantic moneymaker.

You know, US healthcare is, you know, there's crazy profits in that business. It's one of the leading insurers and it's only trading at 11 X free cash flows right now. And like, just to give you an idea, United Health over the last 10 years has pretty much a 14% compound annual growth rate on free cash flow per share. So I mean, it's grown at a crazy clip

over the last 10 years. So it's, is this just a one-off, you know, due to the uncertainty and can they get back to that, you know, earnings multiple or sorry, free cash flow rate. And what I will say is that, you know, companies that can compound free cash flow at 14% a year typically don't trade at 11 X at cash flow. So it's going to be interesting. I think one of the biggest worries is, is like you mentioned, like why is, you know, this came really sudden. Why is he stepping down?

What are they seeing right now that you know causes them to project growth six months ago but now it's just you know a complete outright suspension of guidance and obviously when you get a situation like this the market is going to react pretty severely and I mean it's they've definitely punished the stock. Yeah, no I think I was surprised I didn't realize how you know how bad it got so No, we'll have to we'll have to keep an eye on that. Let's move on We have a couple more names Canadian names here for those watching on videos. I kicked my camera back I think you saw it shipped a little bit. That's that's the reason now the next on the slate here is Franco, Nevada

Take your FNV. It is a company that I own they're dual listed It is a precious metals streamer just to explain for new listeners It's a company that we've talked about before but precious metals streamer essentially they provide financing to mining companies Whether it's more junior companies in exchange for streaming deals where they have an agreement to purchase a certain quantity of gold at a pre-established price in exchange for financing. The other thing they'll do is like royalty deals. They'll do that with even more established companies that they give them a cash payment or debt financing, whatever it is, and in exchange, you'll get a royalty on gold, silver,

whatever it is that is in the agreement. So it's a very good business model in my opinion. They do trade at a premium, but I think it's a really good company to hold and you don't even have to worry all that too much because typically their costs will not go up all that much. They have gone up a little bit, the average price that they were paying for gold, but much less than the price of gold itself.

So I think it was like an increase 11% in the past year, whereas the price of gold went up like 40%, something like that. So that's pretty good for your margins. Yeah, yeah yeah definitely so revenues increased 43% to hit a record high of 368 million for the quarter they sold 3% more gold equivalent ounces, GEO that's what it's called versus the previous quarter this is just a metric that levels out the different type of metals that they would be producing they still predominantly produce gold and precious metals in general but they'll have silver levels out the different type of metals that they would be producing. They still predominantly

produce gold and precious metals in general, but they'll have silver in there. They'll also have oil. They'll have other things. So it just gives it a common unit to show they're basically all prizing in gold equivalents. It's an important note here since Q1 2024 was the first full quarter where they did not include the Cobre Panama. I always have trouble with that word. Cobre Panama mine. So that was last year was the first quarter. So this year it's actually let's say a like for like. So there is not any kind of distorted effects because there would have been that production not there anymore. So it does make sense to look at Q1 2024. And keep in mind that the 3% gold equivalent ounces GEO is for all the precious metal and the other commodities like I just mentioned.

And for gold specifically revenues increased 53% to 246 million on a 10% volume increase. So that tells you right there that gold is ripping and Franco Nevada is benefiting. The average price they obtained for gold was $2,863 an ounce, which was 38% higher than the rate they got last year. I think at this rate, obviously, we don't know where gold prices will go for sure, but I don't think it's out of the question that they'll achieve above 3k an ounce for the second quarter, the way it started. So it'll be really interesting. But yeah, it's, I mean, it's looking pretty good for them. Yeah, they get to benefit effectively from the increase in price of gold with that like no operating costs.

I mean, obviously, like in an environment like this, the producers will go up more than a company like Franco. Like, it's not going to have that effect. Like if we look to Agnico, they're up, you know, 150% over the last, I don't even know what that would be since, yeah, pretty much over the last, I don't even know what that would be, since, yeah, pretty much over the last 14 months. But again, then you get the environment where if gold dips, you're going to see huge drawdowns in the producers and Franco Nevada is a bit better positioned because it doesn't have that exposure to the mines, the operating costs, things like that.

I mean, it's, I would say it's, it's the safer play when it comes to, if you want exposure to gold through an equity I would rather buy a streamer than a producer and yeah, they've just killed it. I mean we have to remember What was Cobra? It was like 20% of their EBITDA and that's out of the business right now. Yeah, and they're still doing Exceptionally well. Yeah, and they seem on the call. They were definitely more positive with the Cobra seem on the call they were definitely more positive with the Cobre Panama mine. Yeah like you imagine if that gets resolved. Yeah and they like they wrote it off completely so clearly the tone is definitely changing a little bit from Franco Nevada so we'll have to see where that leads but that would be a massive

boost I mean you're not investing in them with the hopes that it that it restarts. I think that's not the right way to approach it. It's more as a bonus but if that happens that would be a big boost of production here. Net income was 45% higher than last year. They increased the dividend by 5.6% because look at that they can actually afford to pay a dividend and it's sustainable. They continue to have an amazing balance sheet. They have over 1.1 billion cash on the balance sheet. They have zero debt and if you combine a credit facility that is available to them if they need it, they have close to 2 billion in available capital to deploy. So this is a company that's very well positioned.

That's their business model. They have that capital and they make the best way to explain it is just see it as a company that makes a bunch of bets all over small bets. Some will pan out, some will not. But the ones that do typically will do quite well and you just need a few of those to really pan out to make it worth your while. And because of the deals that they have, they can get some either really nice royalties or some really nice streaming agreements where they can really help them to buy gold at a depreciated price. And that's how it remains.

It allows them to stay very profitable even if there's a drop in the gold prices because often well, because usually the price that they're actually purchasing very profitable even if there's a drop in the gold prices because usually the price that they're actually purchasing it, even if there's a drop in gold prices, will still be much, much lower and they'll still have healthy margins where it gets tricky for miners because their costs will still keep going up. And for them, the costs, yes, they will go go up a little bit but they remain much more stable than traditional miners. So that's definitely why I love this business. I own it, I re-added recently to it. So starting to be a decent position I think like 3-4% for me but the company that I

do not have any reservation I think they'll do very well long term. But again, it is still a bit of a cyclical play, but it's, in my opinion, it's the highest quality. Yeah, I would agree. It's a company we cover quite a bit. I'm a big fan, but I did not buy it. I came very close, but I never did. Yeah, I mean, I'm sure I can rattle off tons of names that I came very close and not buy it and I regretted it.

So that's part of investing. You have to be at ease with regret. Like you, there's always gonna be something whether you didn't sell soon enough, you didn't buy it, whatever it is, you're going to face regret. You just have to be comfortable with it. You can't make all the right moves.

If we did all the right moves, we'd be probably not doing this podcast anymore. We'd be, you'd be playing golf all day and I'd be mountain biking all day. So let's move on here to the last name on the dock, Go Easy. Very interested to see you hear what you have to say on this name because it is a company that we've both said could get into some trouble if the economy starts turning around a little bit. Yeah, it's like GoEasy. I followed GoEasy for quite a bit, probably seven, eight years.

It was probably one of the softer quarters I've seen it report. So again, yeah, if you've been listening to the podcast for a while, you can probably remember we've pretty much covered This company probably every quarter it reports Yeah since I've come on to the podcast kind of because it's it's an interesting one in terms of like a barometer of the health of the Canadian consumer especially like Maybe lower-class middle-class, you know income earners

I mean, it's a really good idea as to the overall health and just the overall cost of living situation we have here in Canada. And it was a soft quarter. It was, you know, we had talked previously about how Go Easy was reporting outstanding results like originations were going through the roof. Earnings was they were through the roof. we kind of said that you know this might not be a good thing which you know it seems a little bit weird but it makes sense when you think about it I mean the weaker the economy is and the higher the cost of

living the more people would turn to subprime lending but again as you mentioned the difficulty is when the economy rolls over subprime lending. But again, as you mentioned, the difficulty is when the economy rules over subprime lenders are often the first to take a hit. And don't get me wrong, I still do think GoEasy is an outstanding company. I'm primarily speaking on the drawdowns and share price because GoEasy has survived a lot of economic hardship, I guess you could say in terms of an operational basis. But when we look to the actual share price in these types of situations,

I mean, it's 50, 60, 70, 80% drawdowns in price historically. So there is definitely a situation where in an event with the subprime lenders, the stock price can get severely disconnected from the actual operations of the business. And that's kind of what I've been saying. And a lot of people kind of think that I don't think this is a good company or anything. That's not the case. I just think, you know, panic would set in on these subprime lenders much more than a prime lending

bank, for example. But in terms of operations, so they grew revenue by 12 percent and earnings declined by 8 percent. This is probably the first time in quite a while that I've seen a decline in their earnings and loan originations were down 1% on the quarter. So if you look at a chart of Go EZ loan originations, it's pretty much been up and to the right for quite some time. I mean, when you look at year over year originations, so in March of 2025, you can see we have 676 million in March of 2024, we had 686. But I mean, if you look back to March of 2023, 615, March of 2022, 476, March of 2021, 272. So it's been a long time since this company actually reported if we're looking at q1 an actual decline in

Originations and the thing here is the company's applications for credit were up 10% So this is not a demand thing. I think it's more so go easy. It's just tightening up credit Yeah, they get this would have to be what it is. Yeah, it's a smart risk management move for sure. Yeah. And the thing about it is this company's growth over the last few years, and this isn't my opinion or anything, they outright state it themselves, is the tightening of the big banks, which has effectively forced people to come to subprime lenders for money. So the banks have been tightening up well before GoEasy has been tightening up. I mean, the banks, you know, they're getting

a bit stingier in terms of loans. And obviously when, you know, when you need the money and you can't get it from a prime lender, I mean, what's your next option? Probably subprime lending. And there's not really a lot of options here in Canada, so they tend to come to GoEasy, but it looks like GoEasy is now starting

to tighten things up. And that could be a trend that continues to be happening. really a lot of options here in Canada, so they tend to come to go easy, but it looks like go easy is now starting to tighten things up and that could be a trend that continues. Charge-offs declined by 20 basis points, so they sit at 8.9% and provisions came in at 7.8%. Obviously these provisions are way ahead of any major bank you'd see, but it's pretty typical. One thing to add too, just so people run their heads around it. So think about it this way, if there was less loans originated,

what that will do is it will slow down profit growth in the near term, but will probably make sure profits don't crater long, medium to long term. So it's this kind of, I think it's the right approach to do because if they kept ramping up, increasing the loan origination,

sure profits in the near term would probably keep going up but then that's where you start getting into trouble, medium to long term because then you start getting higher and higher default rates on those loans because you provided too much credit to too many people that actually were in precarious positions and had the potential of losing their jobs or whatever reason. So I think it's this balance that they're trying to do. So it may be counterintuitive for some, short-term higher loan originations usually means more profits less means less profits but better results long-term. Yeah exactly I

mean they could they could get away with it if they got lucky to an extent where they just kept ramping up originations and you know the economy didn't get bad enough and then you would get to a situation where they would probably do very well but this tightening is what you should probably expect in this type of situation. It probably gives a good indication of the forward environment, go easy kind of things we might be heading into.

And they do mention this on the conference call. But bad debts, they continue to accelerate. So they increase by 24.6% year over year. And just overall margins took a hit across the board so operating margins fell 2.3% so they sit at 37.9% return on equity fell by 4.2% so that sits at 20.4% I mean it is important to note that these are still rock-solid numbers I mean it's they're crazy good but they are dipping a bit. And

the other thing I did want to note as well as they're seeing some crazy growth in the auto segment. So go easy got into auto lending. I can't remember what when it was. It was not more than, you know, three, four years ago. Yeah. And I think this kind of makes sense because of the auto made automobile environment, because you can't even get a used junker vehicle that runs for under five grand anymore. So, I mean, there's probably a lot of people who previously might have been able to pay the small price tag for a used vehicle to get around,

and they might have to finance it now because of just how expensive used vehicles are getting. So I could definitely see continued need for auto financing in the future. And I actually saw something on X as well for just automobile loans in general. They're extending the loan amount up to like, you can get like 84 plus month auto loans. Yeah. I think you can get 96 now. Yeah Oh like disaster. I mean that's like it's a disaster

I mean, that's pretty much a surefire way to have negative equity in a vehicle. Well, yeah, I mean you're you're probably always having But I guess but it makes sense to write especially if we start having tariffs on But it makes sense too, right? Especially if we start having tariffs on vehicles that are imported from the US to Canada or elsewhere, it'll make new vehicles even more expensive. So if someone needs a car and a new vehicle is not an option, they'll turn to the used market. Yeah, for sure. I mean, I think a lot of in regards to the auto, I mean, a lot of people don't really focus on total cost own. They just want to get that monthly payment low. So, yeah, I mean, obviously those of people don't really focus on total cost own, they just want to get that monthly payment low. So, I mean, obviously those extended terms help that, but yeah, the auto sector is doing quite well. The problem, I guess, with the auto is when, if people start getting into trouble,

auto payments are one of the first things to go. First to go. So, and your collateral is not that great either on it because it's a rapidly depreciation asset. So it's something to keep in mind, but they have a good track record. So if any company can weather that, it's probably them. Yeah.

So when we look to yield, so we got a chart here from FinChat on the yield. So you can see that GoEasy's average yield on their products has fallen quite a bit. I mean, we're looking at forty six point six percent in December of 2020 all the way down to thirty one point three. And there was I think this was the last year that the government came out and actually set the rate cap on the loans. I think it was at thirty five percent or something.

So Go easy didn't have a lot of exposure on that side of things. Like the bulk of its products were actually below that mark anyway. But I think the one reason you're seeing this fall in yield, which again, as you mentioned with the originations, this probably means lower profitability, but over the long term, this probably means better results because the main reason they're falling is because the company is securing, is getting so many secured loans now. So P locks pretty much home equity lines of credit is one of their fastest growing segments. So it grew by 29% year over year and they have an average LTV of 65%. So loan to value this. If you own a million dollar home, you have a $650,000 mortgage, you would have an LTV of

65%. So that's a pretty good LTV. I mean, where it gets dangerous is where you get into the 80, 90% range and their portfolio now sits at 46% secured loans. So this is probably why this is decelerating a bit. And again, you make more money off unsecured loans because you can charge a higher rate of interest, but they also carry substantially more risk. I mean, a HELOC, they pretty much, if you don't pay it, they take your home, or at least they sell your home to recover their,

you know, their portion of it. I guess it depends whether it's the first or second mortgage on the home. That's probably the issue. Yeah. But they're more stable than an unsecured loan. So obviously, this is going to fall, but really it's healthier for their loan book to be issuing. And I mean, to a certain extent,

as you mentioned, the automobiles, that's a secured loan. It's a bit riskier of a secured loan because automobiles, like you said, are rapidly depreciating assets. But this yield, I think, will continue to go down, especially if the company continues to add more secured loans. And the HELOC portion of the business is a huge thing right now. And I think the HELOC portion of the business is kind of a huge thing right now because of the state of the economy. I mean, if you have a home and you want to get a HELOC, I mean, you're not going to go easy as the first option because I can't remember what we checked. I think their HELOC rates were nine or 10%. Whereas you can get a HELOC from a prime lender at a much better price than that.

So again, this is probably people who are getting shut down potentially from prime loans or from prime level banks and heading here. So not necessarily a good sign for the economy, but they mentioned that they're relatively neutral on the provision side of things, but they did mention that they're becoming a bit more pessimistic because of the macro environment. And I think we've seen that in the deceleration of loan originations, which it has not decelerated those originations in quite some time. Yeah. No, look, there's some good stuff, 9. nine percent for an equity home equity loan starting from and then the auto loans

You're getting that what say 12 percent. So yeah Yeah, and you had like I don't know the exact rate of like a like say a HELOC from Royal or something But I guarantee you it'd be nowhere close to 10 percent. Mm-hmm And then if you apply for a personal loan, it's 29.99%, but you get a 2% discount, a 2% lower rate if you have a co-applicant. So it's, you can probably sense the sarcasm in my voice, but I will, no, no, I mean, obviously they're there for a reason, right? They're more a lender of last resort for people. I think that's how most people will approach them.

So yeah, I think it's, I agree with you. I think it's a good company overall. It's just a bad time, in my opinion, in the cycle to, to own them. That's what I've been pretty consistent on is you don't really want to be owning a company like that when the economy has a pretty high probability of turning over and entering a recession, at least in Canada, because a lot of these loan holders, so a lot of their clients and customers, they may just be able to make these payments right now and still have a job. And if you start seeing the unemployment rate rise pretty quickly, while those people that could barely make those payments, if they lose their job,

then these are loans that essentially have to be maybe not entirely written off, but a good portion of it. Yeah, yeah, I think it's a good, I think it's a situation where we're going to see their results dip moving forward, but that's likely just because they're being a bit more prudent in terms of lending. And yeah, I looked up like a heat lock with somebody like TD Bank and it's 5.3%. So you're going to go easy. You're probably paying double the rate. So it's not really, it's not like you said, the lender, you know, that's the top priority. But I mean, ultimately, the more they can add those secure loans to the portfolio, the better that loan book will look long term.

But it's going to be I'm sure we'll cover this company every quarter because it's definitely going to be interesting. Okay. Well, I think that's a good place to wrap it up. I think it was a good episode. Actually before we let people go We had a little bit of a blunder on the last news and earnings Regarding guy Gildian Gildian. Yeah the wholesale

Yeah so the reason why they don't have it on their website is because they're a wholesaler which I will still stand by what I said that they Why do you not have that option for companies to buy wholesale on the website? I guess they want more one-on-one interaction, but that would have been the reasons. It's not a company I'm super familiar with.

So just wanted to give people some context there because we had a few comments saying, oh, it's because they're a wholesaler. So that would make sense why they don't have it on the website. But again, I think probably not a bad thing to add some online functionality even if you're making some large wholesale orders but what the hell do I know maybe it's just not how it's done yeah yeah I had somebody reach out to me on blossom it was and say that they were a

wholesaler and then I checked my t-shirt and it was it was Gildan. Yeah. Yeah exactly So so anyways, I think that's a good point to end it. My dog is barking. So I think before he starts screaming a bit too loud and we have to edit this to too much I think we'll let it go So thank you everyone for listening and we will see you on Monday for a regular episode. Thanks for listening everybody. The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making

any financial or investment decisions.