The Canadian Investor - Higher Profits for Loblaws and Slowing Growth for Air Canada

Episode Date: May 10, 2024

In this episode of The Canadian Investor Podcast, we tackle recent news and earnings. We start the episode by going over Brookfield Renewable Partners recent groundbreaking agreement with Microsoft to deliver over 10.5 gigawatts of renewable energy, crucial for powering Microsoft’s AI-driven cloud services.  We also cover a slew of earnings reports including the TMX Group’s solid results despite market challenges, Air Canada’s slowing growth, and Loblaw’s steady growth despite a challenging inflationary and political environment .  We finish the episode by looking at Allied Property REIT to better understand where office real estate is trending and look to see how Telus is doing compared to its peers.    Tickers of stock discussed: AP-UN.TO, X.TO, T.TO, BEP-UN.TO, MSFT, L.TO 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 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.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger. Welcome back to this special episode of the Canadian Investor Podcast. Like we mentioned on yesterday's release, there's just so much going on in the investing world right now in terms of news and earnings. So Dan and I just decided to do an extra episode with mostly earnings.

A little bit of news sprinkled in there, but mostly earnings a little bit of news sprinkle in there but mostly earnings a lot of Canadian focus earnings so definitely you know fits well for the Canadian investor podcast so Dan how's it going are you reeling a little bit from last night from a not great finish from your yourers? Yeah, that was terrible. It was 4-1 and my wife went to bed. And then when I come to bed, I'm like, oh, they lost. And she's like, what? They lost?

That was a terrible, terrible game for the Oilers. But I don't know if it can get much worse than that. But yeah, lots of good. Yeah, yeah. It can. You could be a Maple Leafs fan. That is true. Yeah. That is true.

I'm probably going to get a lot of oh yeah definitely definitely yeah actually before we get started i did a fun poll because obviously i'm a habs fan and i think that habs will actually like next year probably like i don't know they may be in the mix for a playoff spot but i think the expectation is if they make it great if not as long as they're still competing. And I did a poll asking whether people thought that in the next five years, who was most likely to, I think it was win the cup between the Habs and the Leafs. And it was actually closer than I thought. I said, like, emotions aside, like, who do you think has a better shot? And it ended up being 60 40 leafs but

just kind of shows that maybe their competing window is closing a little bit yeah there's probably a lot of uh kind of defeated maple leafs fans who clicked habs on there too just because of the uh i mean just because of how upset they are yeah it's uh it's interesting i mean the oilers gotta pick it up or it'll be uh it'll be a quick end for them yeah i mean i i'm look i for me i just want interesting hockey at this point so and oilers i mean usually get some pretty exciting hockey that was definitely not interesting uh yes unless you're a canucks. Then you probably found it very, the complete meltdown, very interesting. Hey, it's okay. Yeah, I know you live, you learn, as long as they learn from it for next game.

But enough about hockey. There's tons of good hockey podcasts out there, so we'll get started here. The first thing on the doc is BEP, so Brookfield Renewable Partners. Their earnings, I won't go into too much detail about the earnings, but there was also a big announcement about Microsoft and a partnership with them. So the news, I think, really overshadowed, to be honest, the earnings release. It was a few days earlier, and essentially BEP signed a landmark agreement with Microsoft to deliver over 10.5 gigawatts of additional

renewable energy capacity. And of course, this is to further support the growth of Microsoft's AI-powered cloud services. Now, they expect this capacity to come from North America and Europe and to come online between 2026 and 2030. They also expect to bring gigawatts of new capacity annually through the end of the decades. As interest rates have stabilized, they mentioned also that the market is getting better for renewable energy assets, which should help them in their asset recycling program. And the asset recycling program is pretty simple. I mean, at its core, it just means that Brookfield in general, they have this philosophy where they'll buy assets that they perceive as being undervalued. They will fix them.

They will make it more efficient. And then they'll sell them and then kind of repeat this process. Although there are some assets that they will keep for the long run, but some assets they do buy and then, you know, it's kind of buy low and sell high type of deal. Now, their FFO, so their funds from operation was $296 million. That was 8% higher than the same period last year. Overall assets perform well, although their revenues are shifting more and more. They repurchased over 4 million units in the last nine months.

So clearly they think that the stock was undervalued. So, you know, overall, I think a pretty decent quarter here by BEP, but definitely the news of this landmark agreement with Microsoft was what really overshadowed and took the forefront. Yeah, I think there's a lot of incentive for it. First off, like just the AI, just the AI in terms of power generation, things like that. And it's like a lot of these companies are looking to be net zero. They're probably going to look towards, even if it's a bit more expensive to develop it, the renewable end of things. 10.5 gigawatts is,

I would say that's probably in terms of Canadian renewable players, like Brookfield's pretty much the only one that could handle something like that. I was looking up Northland Power, which is another big renewable player, Canadian renewable player, and they only have around three gigawatts of capacity. So you're looking at this deal over a 10-year period is more than triple what the total capacity of something like Northland would be. So, I mean, it's a pretty big deal. I imagine it's probably not the first. And I believe that they typically target 10% to 15% FFO growth annually. So 8% is a bit lower,

but considering the environment right now for utilities in general, it's really not all that bad. This is one that I own, Brookfield Renewables, a pretty decent sized position in my portfolio too. I've owned it for quite a bit. Yeah. And look, I think it's to me, obviously I'm biased here and I think you're probably as well a little bit. I think it's a great company to own, but again, I think I've owned it since 2017. That's when I started my positions in BP. And I think, unfortunately, a lot of people probably started around 2021 or during the pandemic. And you're looking at a loss, obviously, if you started during that time, because there was a big run up for renewable energy stocks. Let's be honest, there was a big run up in the market overall during that period of time. But clearly, I think they were beaten down in the last year, year and a half. The culprit, I think you alluded to, like higher interest rates, right? It just makes these companies a

bit more difficult to operate when they're so reliant on debt and higher rates. It makes it a bit harder to grow and obviously puts a downward pressure on earnings or funds from operation, which are just a variance, which are typically it's a non-gap metric, but it's typically used by utilities. They'll have some sort of similar calculation of fund from operations, but it'll be interesting where it goes. The last thing I'll say is the stock has really been on a bit of a tear, right? Since this has been announced. It's been about like, what, a week and a half, 10 days. And you can see that the stock was, before the announcement, trading at around $29.

I'm talking here about the limited partner units. There's also the C-Corp units. So it was trading about $29 Canadian and now it's up to $37. So quite the run-up since then. And for me, I mean, I'm definitely a long-term holder. So, you know, it's nice to see the run-up, but doesn't really impact what I'm going to do with Brookfield.

Yeah, and it's not going to have like a massive impact on results like immediately. Like you said, I going to have like a massive impact on results. Like immediately, like you said, I believe this is like a rollout over a decade. So, I mean, it's not like it's, you know, 10 and a half gigawatts of capacity, like going online next year. It's a really slow rollout, but it's still like, I think it's more of a positive sign for the industry overall, because there's a lot of negative sentiment towards renewables right now and just how you know they might not really be you know all they've been cut out to be but this is a big deal and i would imagine it's probably the first of of many yeah yeah exactly so i think we've talked enough about brookfield and i forgot to mention we broke our

streak here of episodes where neither of us is sick. So unfortunately, I got a cold again, but that's okay. I'll leave it to you and catch my breath a little bit and probably blow my nose while you talk to us about TMX Group earnings. Yeah. So TMX Group, it's a pretty underrated company. It's one that we've covered over at StockTrades for quite a while. It's got a pretty wide moat simply due to the lack of competition in canada for public exchanges and as a result

it's posted some pretty strong results despite a pretty tough equity market like i i would say tmx's main competition would be like the neo exchange maybe but it's they own the you know toronto stock exchange the venture and the uh what's the one canadian securities montreal montreal exchange yeah the montreal stock exchange yeah like they which is essentially derivatives so for those who are not familiar with it it used i can't remember when the acquisition but it was definitely over a decade ago and montreal like when you buy options like typically that'll be the the Montreal exchange, any kind of derivatives. Yeah, it's similar to the CME, so the Chicago Mercantile Exchange in the US.

Yeah, so when you think of just overall competition, the NIO is pretty much it, which has only emerged the last few years here. But TMX is pretty interesting because a lot of the KPIs kind of give a pretty big indication of the overall health of the Canadian markets. So they'll give you the inside scoop of new listing activity, trading activity, all that kind of stuff. So they topped expectations on both top and bottom lines. And the company actually hasn't missed earnings estimates for over two and a half years now. So you're talking about 10 plus quarters where this company has exceeded results. So the company's trade port segment, which is a platform that focuses on European energy markets, and they acquired it a few years ago, saw revenue grow by

over 20%. This isn't really all that surprising. There's a lot of action and volatility in energy these days. It's data link segment, which would be like data streaming. I would imagine like streaming quotes, things like that. It grew by 3.9%. This is the lowest growth rate in the segment for over two years. Listing fees declined by 16% year over year. So this may seem pretty bad, but if you look to listing fees from like peak COVID to, you know, farther on into 2022, 2023. This company was reporting like 30 to 50% declines in year over year growth, just because of how popular, I mean, we've seen it the last few years, the IPOs. What did you say there was? I think you said mentioned in 2023, there was like one IPO or something like that? Yeah, there was one. Yeah, one IPO. I think

they had more. So that was on the TS ipo i think they had more so that was on the tsx i think they must have had more i can't remember on the venture but yeah i would imagine venture yeah there's it's not as profitable for for them yeah so i mean you look at uh december 2021 listing fees of 6.3 yeah 6.3 this would, this would be million, I would imagine. And you're looking at 2.1. So it's fallen by close to 70% off peaks. I mean, this really isn't all that surprising. Raising capital, extremely difficult right now. Valuations, even from a valuation perspective, it's really not that lucrative right now to go public because you're not going to get the crazy high valuations you would have got in 2021 when some of these IPOs I remember were coming out at

20, 30x sales and it was just crazy. But that's kind of dried up. I just think that companies are probably waiting for more opportunistic times to go public. Equity and fixed income trading revenue fell by 7.8% year over year. This just kind of shows you the state of the Canadian markets at this point in time. I mean, Canadian stocks are nowhere near as popular as the U.S. Canadian consumers are arguably in a much weaker spot than their U.S. counterparts. I mean, I remember this was probably a while back when I had mentioned that TD study. I don't know what the stats are now,

but TD came out with a study that said 47% of Canadians who had investment accounts didn't make a single contribution to them last year. So, I mean, it's pretty tough for them. And I mean, you'd think the results like this would no doubt be pushing the company lower, but it just continues to make new all-time highs i mean i just maybe maybe think they appreciate the fact that despite how rough it is like they're still performing quite well yeah and i have here um for our joint tci listeners so the initial listing fees so yeah you get the

per quarter so it's literally uh for those are not seeing the visuals. It kind of goes. It's relatively low around 2.4. I believe that's in millions. So it is 4 million. Yeah. Before the pandemic, then the pandemic hits and then slowly it just picks up, picks up and then pretty much triples from there at the peak.

And now it's back to kind of pre-pandemic levels, like even lower, like 2.1 million in terms of the latest quarter. So I'm assuming this would include the venture because just I don't think there's that much happening on the actual parent exchange, if you want to call it. Yeah, they don't separate any data between their particular exchanges.

So this would be just listing fees just overall. Yeah, I mean, it's interesting. I just don't like, I think they, I do agree with you. I think they have some kind of like a decent moat here, but they really, I just don't see where the growth is with TMX, right? Yeah, I mean, you need, first off, you need trading activity to pick up too and you need more interest in the canadian markets which i mean it's pretty tough right now i mean you we saw a lot of a lot of companies yeah it would have been in 2021 or 2022 like it's particularly like tech companies

that you know they initially listed on the on the tsx and they they dual listed like they tried to get onto the u.s markets we saw like back in the day Lululemon just completely left the Canadian markets went to the US markets so yeah it's it's pretty tough they definitely need a probably a resurgence in activity on the Canadian markets more you know popularity in terms of them and just a healthier consumer yeah I think the reasoning if your business is if your investor base is really, there's a big portion of your investor base that's domestic in Canada, then of course it would make sense because it's just easier to access, you know, the stock that way.

If it's listed in Canadian dollar, you don't have to go through the whole exchange process. But I'm thinking a company like lululemon i feel like the investor base is more international u.s and canada whereas you have all these like big canadian dividend payers we know how much canadians love their dividend stocks and i think you end up you know it ends up making a bit more sense to be dual listed yeah they had uh well there was one it was Acuity Ads, that's now Illumine, but they went on the NASDAQ and then they pulled it. They don't

even trade on the NASDAQ anymore, just because first off, the fees are much higher, I believe, to list on the US markets as well. So I mean, if you're not, if it's not very popular in terms of volume on the US markets here, they pulled out, they didn't want to be involved in that anymore. But yeah, it's, I don't yeah, it was a pretty good quarter. I mean, it just continues to rip to new all-time highs. It's been one of the best performing Canadian stocks for quite some time now. But I think a lot of people,

I mean, a lot of people don't really pay attention to it all that much, but it's a good overview of just the health of the Canadian markets in general. Yeah, well said. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free

so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast,

I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend

it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Now we'll move on to Air Canada. I know that's always a pretty popular stock that people have on their list. So now for those following the name, you probably noticed that Air Canada stock was down 10% on the day of the earnings release. We'll have a look at what actually happened. I'll be looking at this on a year over year basis, mostly because airline revenues are very cyclical in terms of seasonality. And revenues were up 7% to 5.2 billion. Passenger

revenues were up 9% to 4.4 billion. So definitely encouraging still some growth but clearly slowing down here compared to the pent-up demand that we saw in the previous years cargo was down 10 to 125 million same thing here cargo really picked up during the pandemic when people couldn't really travel all that much uh and were spending their money on a lot of goods. So that was a bright spot for them during the pandemic. But now they're seeing the slowdown here. Expenses were up 6%. The biggest increase was related to employee compensation, which was up 21%. Aircraft fuel cost was down 8.8%, which is a bit surprising, but I'm assuming this is because they have hedges in place. I would assume they have that to make sure that whatever price they purchase fuel at, it's hedged against too much volatility.

And digging further into this, the fuel cost per litre was down 17.9% year over year, which could be a headwind going forward. They had a net loss of $0.22 per share compared to $0.03 per share last year. Free cash flow increased 7% this quarter to a bit over $1 billion. They said that they saw strong growth in their Asia-Pacific routes and increased the number of routes there to meet demand. They reaffirmed their guidance that they issued at the beginning of the year, but said that although growth is still strong, it is starting to slow as pent-up demand is slowing down from the pandemic. The combination of slowing growth and higher expenses, I think, is most likely what hit the stock when earnings were released.

And they are seeing encouraging growth signs for corporate demand, although not as robust as their American peers. So overall, I mean, not overly surprising in my opinion. Kind of, if you think logically, kind of expected in terms of the results. I've been saying this for a while is that I'd be interested in seeing how they would do because at some point that pent-up demand will slow down, and especially if the economy is slowing down as well people have less money to spend you know if you zero out the business part at some point you know that's an easy expense to remove if you're you know you usually plan a

yearly trip or multiple trips a year and then you know you have to save some money maybe you cut a trip or maybe you end up you know renting a cottage that's cheaper whatever it is so not surprising for me yeah and i think what the one important thing to know too is like i i'm these companies make a ton of money from business travel like they're usually like i mean i don't know why i guess maybe they book more expensive seats maybe they spend a little more you know like on like on food, things like that. But I know like Air Canada, typically, like a lot of their profits were based off business travel, which if you think of like, traditionally, you know, maybe they'd fly people to meetings, whereas now, you know, the popularity of, say something like Zoom, you know, you could have a meeting over the computer instead of flying employees to particular places. So I think business travel has a relatively big impact on these companies as well. I'd be curious as to how that's rebounded. And then I was just, while you were talking, I looked up Air Canada's debt levels and they've actually reduced them by

a significant amount. It's pretty crazy. So at the peak of the pandemic they had 17 billion dollars in debt and they've reduced that down to 9 billion it looks like so i mean a big big reduction in debt and their uh their interest expenses on a trailing 12 month basis have fallen like september 2022 peaks of 746 million to just 442 million. So I mean, debt's been, I didn't think they'd be able to pay off all that debt that fast, but it's pretty impressive. Yeah. I mean, it helps when you don't have a dividend at all. You can actually focus and that's probably what's been helping them is they can actually allocate money to pay down that debt. And I have here the long-term debt for them.

And definitely it's been going down significantly, like you said, since the peaks had the pandemic. And, you know, not to go back and harp on BCE again, but it kind of shows that dividends, you know, sometimes it can be a big problem because it doesn't allow you to pay down that debt when it probably is the right move to do yeah like you're cutting interest expenses significantly which ultimately will just help you farther down the line i remember during the pandemic i'm pretty sure this company was like putting up like planes and and airline parts for like collateral to get to get more financing just because of how badly they were hit but they look to be getting back on track the uh air canada i think was it was like one of the best performing stocks and in north america over like from i can't remember what it was maybe

the last you know 15 years or 10 years leading up to the pandemic but i mean yeah at some point it was really undervalued and they still did well for operating metrics as well so revenue passenger miles which is the number of passenger multiplied by the amount of miles traveled increased 10.5 percent available seat miles capacity was 11.1 which is simply the number of seat available by the number of amount of miles traveled. That was up, sorry, 11.1%. And costs per available seat miles, so CASM, which is the operating cost divided by the available seat miles, was down 4.3%. Now, the lower, the better here, since a lower number means that the airline is more efficient. And then the passenger load, which measures how many seats are sold to paying passenger was down 0.5% to 84.3% or 50 basis point is what I meant

here. Of course, the higher is better here. Still not alarming or anything, but something to keep an eye on. If you are interested in investing in airlines, you definitely have to keep an eye on if you are interested in investing in airlines you definitely have to keep an eye on those metrics not only how air canada does but compared to its peers unfortunately west jet is no longer publicly traded so you can't really compare the two so you'd have to definitely compare it most likely with a one of the larger u.s airlines to be able to kind of get a sense whether air canada is doing well or not there yeah i, I think Onyx, yeah, Onyx bought WestJet, which I think like during the pandemic kind of killed their ability to get funding. Whereas Air Canada kind of got a bit of government help, but because WestJet got bought by, you know, pretty much a private company,

well, a publicly traded company, but they weren't like a full-blown airline they were kind of more in the fold they didn't end up getting i don't think nearly as much but yeah it's i mean it's a fairly decent quarter from air canada i mean i expect we'll see declining numbers moving forward because it's getting really tough right now in terms of just overall money and this is one of like you said, this is one of the easiest things you can just cut out. Yeah. And airlines is a tough business. That's the reality of it. There's a reason why Buffett, you know, invested in airlines back in the day, said he would not again, invested again and said he was done for good. So, you know,

I mean, you can still make money. You just have to, I think, timing is important. It's not the type of company that I would hold forever just because it's really the expense side that I think for me is the biggest thing preventing me. Fuel costs, employee costs. And then you tack in the fact that there's also cyclicality, especially with the economy. It's not the kind of business I like. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select

ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast,

I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings,

I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information think enough about air canada you want to go about talking to us about the most love company in the country canada yeah exactly yeah galen weston i always mess up his name why yeah did i say it correctly yeah yeah yeah so loblaw pretty strong quarter

which i mean if you're an investor it's a good thing but like if you're you know i don't even know if you're in that reddit group yeah you absolutely despise it but um the retail end of the business had same source sales growth of 3.4 percent uh shoppers drug mart grew by four percent but they they take shoppers drug mart Mart as a whole because they do sell food and all that type of stuff. Well, I don't even necessarily think food, but drinks and all that kind of stuff. So if you isolate the pharmacy and healthcare side of the business, they grew same store sales by 7.3%. So there's actually pretty strong growth in its pharmacy area, health and pharmacy area.

So an interesting element here as well is the company continues to see quite a bit of growth in e-commerce. So, I mean, I think it's just more of like a permanent shift out of the pandemic for people who prefer to just order online over visiting physical stores. I personally haven't done this myself. I think we did it once during COVID, but I don't know. I personally haven't done this myself. I think we did it once during COVID, but I don't know. I'd rather really go into the store, but you can just go online, order groceries, and they'll just box it up for you,

and you come pick it up. Yeah, exactly. We did it a little bit during the pandemic for sure, but yeah, we've noticed that oftentimes if you bought produce, it was not always the the nicest one. Or sometimes they like, you would ask for something, they put a substitute in and you didn't really want it. I mean, there's still people that do it. There's one not far from my place and there's like parking spots reserved for that. And there's still cars there. Like every time I see cars there, I'm like, oh yeah, I guess there's still people doing that.

Do they bring it right out to your car or do you have to go in and get it now no you can uh i think they they would still bring it right out to your car yeah yeah i remember we only did it once during the pandemic and like you said we got like the produce was was bad so we're like yeah we're not we're not doing this again but that grew by 16 year over year i, and I mean, this is probably compared to some pretty high, like pandemic type comparables. So I mean, it continues to grow. A lot of focus was on the grocery margins right now. So they reported gross margin of 31.6%, which is a 30 basis point increase from last year. Now the company doesn't like separate out margins by segment. So you pretty much have to rely on what they're saying. They say that the bump in margins was not due to

food, but it was due to the company's pharmacy segment, but they don't actually lay out the numbers. So there's going to be some, a bit of fogginess there, whether or not you believe them is another thing. Again, it's going to depend on, side of the fence you are on this. But the other hot topic that is probably going to drive those people crazy is the excess profits they're bringing in. So the company bumped the dividend by 15% and spent over $470 million on buybacks. Again, beneficial to shareholders, no doubt, but it kind of amplifies the current, you know, political issues, bad PR about rising food prices and, you know, excess profits. They're dumping a bunch of money back into the dividend, you know, buying back shares. But Loblaws has historically always been aggressive

in terms of dividend bumps and share buybacks. I think it's raised its dividend for 13 or 14 straight years now, and it's usually in the double digits. Buybacks, again, it does that, but it just doesn't really look all that good from the boycott end and the price gouging end. Another interesting... Yeah. Go ahead. Well, what I was going to say,

like for those watching, you'll see like it's basically a straight line down, even if you're looking by quarter to quarter for the total shares outstanding. So it's, yeah, they've been pretty aggressive. And then if you do looking by quarter to quarter for the total shares outstanding so it's yeah they've been pretty aggressive and then if you do a yearly look i mean they're reducing shares at a compound annual growth rate of minus three percent since 2015 yeah that's pretty like i mean that's high it's pretty massive yeah that's i mean if you're a shareholder, it's good. If you want to, you know, it's probably not creating a lot of a whole lot of value in the economy.

And sometimes you wonder, I do wonder why they wouldn't try to like invest more in efficiencies so they can say at least like, look, we're investing in the business to make to lower our costs so that, you know, there's maybe food prices rise less quickly and we still maintain our profits, right? I think that would be a way to maybe give the perception that they're trying a bit harder, but I mean, I don't know. What was it? $1.8 billion or actually $2.1 billion towards capital expenditures to improve efficiency. So they're dumping a lot of money into that as well. So I mean, this company just generates a lot of cash flow. And I mean, it's mostly a volume thing with these grocers, like

low profit margins, just a ton of volume selling groceries. But another interesting thing is on the financing end. And we've talked, you know, a ton about different companies like Canadian Tire. I think we talked about Amex, but the company saw a double digit increase in profits on their financing end, which would be like, it would be like a president's choice, like credit cards, things like that. And I mean, I think it more so, yeah, yeah, exactly. It more so speaks to like the health of the Canadian consumer, like credit cards, balances rising, delinquencies rising, things like that. And they, they reiterated their guidance of high single digit earnings

growth and a significant return of cashflow back to shareholders yet again, they don't grow revenue very fast. It's, you know, they're not going to grow revenue as fast as that earnings growth, which just means, you know, it's going to come through the buybacks through, you know, improved margins, things like that. And again, the main headline in the news right now is the Loblaw boycott that is going on. I actually saw some interviews this morning, they were doing on global news with some consumers at a Loblaw. And a few of them mentioned that the stores were just it was still absolutely packed like they didn't really notice anything different and then they interviewed

another guy that said you know the prices are low enough here that he just doesn't really feel like he has any need to swap grocers so i mean i think they're taking a lot of heat right now due to the fact it's like it's the biggest name it's the one that grabs the spotlight but the thing is and those yeah those commercials like are i honestly i think that's one of the big reasons right he was doing these like pc commercial these president choice his face is out there if you ask people you know who are the ceos of the big grocers in Canada? Yeah, Metro or Sobeys or Empire. I mean, most people would probably be able to recognize Weston where the other two, they would have no idea. Yeah, exactly.

So, I mean, he kind of created that, unfortunately, for him. Yeah, he put himself in the spotlight and now it's it's yeah they just the thing about it is is metro reported as well and i didn't get time to dig into the quarter too much but they reported a decline in earnings which i mean so you're sitting here loblaw is reporting you know double digit boosts and earnings per share while metro is declining uh empire has yet to report so i mean if they report a bad quarter i mean it just makes loblaw look even worse i mean from a share again this is all from like a shareholder perspective and a consumer's perspective from a shareholder perspective you're super happy about this

from a consumer perspective you know the boycott makes a little more sense if these other two grocers are struggling i mean i think the thing is that the other two grocers are struggling. I mean, I think the thing is the other two are struggling, I think mostly because just Loblaw's discount factor, many consumers swapping. I don't think this is like a price gouging element. I think it's just like, I used to shop at Sobeys exclusively.

I haven't been there in over a year because the prices are just ridiculous. So I've swapped to pretty much Costco and no frills. So it would be nice if Lobla had kind of some data on that particular end, like if they kind of segmented, these are the stores that are operating better. But I mean, if I were to guess, you would see the no frills, the super stores are seeing huge increases in volume, which is probably an element from people swapping from, you know, Metro or Empire.

And, uh, that's, what's increasing the overall profits, whereas the others are struggling. I mean, I don't expect the boycott to do very much just because of the same thing I said,

like in Western Canada, no frills and superstore are pretty much the cheapest grocery stores you can go to. Yeah. I just don't think Canadians, when times are this tough, are just going to go to higher price, pay more for their groceries just to kind of stick it to Loblaws for 30 days. But I don't know. Or travel more or like, you know, time is money as well, right? Exactly. as well right i'm not gonna go to grocery store that's like five ten kilometers further away when there's blah blahs branded one or a superstore or whatever uh you know pretty close to my house

right so that's kind of the way i see it because yeah you might be paying slightly less but you know the extra time you're paying a bit more gas if you're driving like at the end of the day are you saving that much money yeah exactly i think that's debatable yeah but i'm doing the same thing as you kind of costco try to go every three to four weeks get most of our meat there it's much cheaper a lot of stuff like toilet paper stuff like that where you know it doesn't go bad you just buy it then in ball kirkland brand and uh we've been saving a lot of money doing that. And then kind of Superstore, Metro, depending on what we're buying. So I kind of, you know, now I'm more aware. I would say I'm keeping a better eye on.

Like I kind of know where certain items are cheaper at like Metro versus Superstore versus, well, Sobeys. Yeah, they're not really cheap. So I never go there. Yeah. Yeah, we like Sobeys is like pre-pandemic it was more expensive but like the sobies by we're at like where we live is so much nicer than the no frills like it's kind of tough to go through the no frills where we're at but now we now we do just because like the prices are just absurdly cheaper but yeah i don't know i like costco is a bit different

too like you're paying you're paying more but you're also getting more volume so i mean it's a higher like out-of-pocket expense at that time but like over time on on particular items it it saves you a ton of money and i think this this trend is probably why loblaws is reporting better earnings, but you know it's going to be politicized to the point where it's focusing on that price gouging element of it and all that type of stuff. Yeah, definitely. We'll move on to something a bit different here. We'll talk about Allied Property REIT. It is one that I own, so take that into consideration. It's one I've owned for some time. And I'll be honest, I'm not sure whether I'll be owning for, you know, super long. I'm kind of keeping an eye on it quarter to quarter. It is primarily while it is an office REIT, they have high quality office. So typically office, you'll have type A real estate, you also have B and C. type A real estate. You also have B and C. Type A is just, you know, there are these newer amenities,

newer office building or older ones that have been renovated. So they have all kinds of amenities that are really enticing for employees to actually come in the office. So Allied has been doing relatively well compared to peers in the space. Rent growth on renewals was strong at 4.7% year over year. Management said during the call that many of on renewals was strong at 4.7% year over year. Management said during the call that many of these renewals are from previous agreements that were done at the heights of the market in 2008-2019. So it is encouraging that they're able to actually increase those before, you know, comparing to when, you know, pre-pandemic. Average price per square foot, which is another key metric, was up 3.2% over a year. However, it was flat versus the previous quarter.

The interest coverage ratio was down from 2.9x to 2.8x versus the previous quarter. So something, you know, to keep an eye on. Total indebtedness was up 120 basis points to 35.9%, which compares the total debt to total assets. And funds from operations per unit, so FFO, was down 5.9%, while AFFO per unit was down 4.5%. And this is on a sequential basis, so versus the previous quarter, the reason why I wanted to say versus the previous quarter is because year over year is a bit misleading here since they sold their urban data center assets in Q3 of last year. So yeah, just like I'm trying to compare apples to apples. So I want to be as transparent as possible. And another point that wasn't great is the payout ratio. So it's up to

77.8% on a FFO basis and 83.3% on a AFFO basis. Definitely on the higher end for both here. And management said their goal longer term was to get it back down to the low 70s for the funds from operation. But they are committed to keeping the dividend at the current level. They will be disposing $200 million worth of assets this year. A big part of that is because they have had some unsolicited offers come in that were very attractive on their non-core assets, and these are typically kind of smaller buildings. So it's interesting that they are actually getting some offers for that. Leased area was 30 basis point lower than the previous quarter at 87%. Occupied areas was also slightly down to 85.9%. The difference between the two is you can lease a building, but you also can have it like, you know, you lease it, but you're not actually occupying it, which we saw was pretty prevalent during the pandemic. Now, not as much. This means they have a vacancy rate of 13%, which compares favorably to the 16.17%

average for downtown class A, according to the CBRE market research for Q1 2024. The bifurcation between class A downtown and Class B and C, like I was referring earlier, is quite massive now. Vacancy rates for Class B and C are 770 basis point higher than Class A. So a big difference. This is more prevalent downtown in the suburbs. The kind of bifurcation is not as significant. It's actually quite close. But yeah, it's interesting that, you know, there is a big change and it makes sense, right? If you're an employer, you want to attract people back into the office. If you have a crappy office space, you're definitely going to have a hard time, harder time attracting them.

Yeah. And I wonder if it's an element of like, probably like the higher class office spaces, maybe rented by bigger companies who, you companies who can probably are a bit more steady on the leasing activity, whereas the cheaper spaces, maybe smaller companies, things like that. The one thing I'm very curious about with Allied, and we actually cover this company quite a bit too, it's at the point where it's yielding so much that even though the the dividend is is well the distribution is well covered i mean could you cut

it and still give people like a seven percent yield and then you know put that money down towards debt like it's yielding almost 11 now i think so yeah Like it's not probably good. It's not like on the surface, they need to cut it. Like 83% for a REIT is a relatively reasonable payout ratio. It looks like it could be easily maintained. But at this point, do you cut it and yield 7% and instead dump a bunch of that money into reducing debt levels? But obviously not. They said they're committed to keeping it the same so yeah which is a bit uh you know similar to bc

right companies are very scared of cutting it clearly you know to their defense allied like you said i mean i think they still have some leeway but probably something they should be looking at if the payout ratio keeps creeping up creeping up it may be a decision that they have to do like i said it is something i'm keeping an eye on just because management has been a bit wishy washy i would say overall which you know it's fine like i know there's a lot of uncertainty in this space but it is you know something i would like to see improve overall like as results the reality is overall i've been kind of trending down, the reality is overall, I've been kind of trending down for the last couple of years. It's been a slow trickle for them. But,

you know, it's not going up. It was a value play for me. I still, you know, you know, still think it could be a value play. But if it doesn't start turning around the next few quarters, I may just cut my losses. So, you know, you win some, you lose some. That's how I see it. You know, I'll try to be patient. I've owned it for about a year and a half now. And one thing I wanted to mention from that CBRE report is that active construction for office real estate has dropped to the lowest level since 2011. And that was one of the things that made me bullish for Allied Property Reads, because if you get to the point that there's almost no new inventory coming in onto the market, even if office real estate, there's not as much demand as there used to be, at some point,

you know, the demand is going to catch up to the lack of supply, right? So that was my thesis as well. We'll have to see. I mean, so far, I'm down probably 25% on that purchase, but that's why you don't put your whole portfolio into one name. It's a relatively small position, so we'll have to see where it goes forward. But that's pretty much it for Allied. Yeah, we'll move on to Telus. So I figured it would be pretty good. We went over BCE last week, may as well go over Telus this week. So much like BCE, they continue to see record levels of customer growth, especially on the mobile side of things. The key difference between the two is Telus has been able to put up a little stronger underlying numbers in terms of revenue earnings and EBITDA. So the company's primary growth is coming from its T-Tech segment.

They kind of separate that away, which would basically be mobile networks, equipment sales, data services, health, agriculture. I even think they include their security services in there, but I'm not 100% sure on that. Just the EBITDA grew by 4.1% and they expanded their margins in the segment. They sit at 39.4%. So the one confusing thing here is, you know, if you just quickly glance at the report, it may look like they raised the dividend by 7%, but it was actually only 3.5%. They raised the dividend semi-annually. They've done this forever. But when it speaks on dividend growth, it primarily mentions the year-over-year growth.

So headline numbers, it'll be like, we've raised our dividend by 7%, but they mean over the last 12 months. So they raised it by 3.5%. I know there was a lot of people mentioning 7% seems like a really big raise at this point in time, especially when they just raised it a few quarters ago. But this is a semi-annual bump of 3.5% year over year of 7%. So operating revenue was relatively flat year over year. Free cash flow declined by 26% to sit at $396 million. So I mean, it's the exact same story from Telus as it is BCE. Reduction in cashflow on a year-over-year basis is primarily due to the restructuring

cost-cutting initiatives, which don't just instantly get absorbed and prove to be beneficial. It does take time. And they did reiterate their financial targets. So, they expect T-Tech operating revenues to grow by 2% to 4% and adjusted EBITDA by 5.5% to 7.5%. It also reiterated cashflow guidance, which it is, you know, that's a metric that a ton of investors are going to focus on right now. So it expects free cashflow generation of 2.3 billion in 2024. And if we looked at common share dividends only with the raise, the company is expected to pay pretty much bang on 2.3 billion in dividends. So when we account for preferred

shares, I mean, there's going to be a bit of a lack of coverage here, but not to the extent of BCE. They're going to cover the common dividend with free cash flow but it's it's really tight and in terms of telus i thought i'd talk on telus international a bit because they they own a big chunk of the company it accounts for a double digit percentage of telus's ebita it was a spin off i think it was 2021 they spun it off it. It was the largest tech IPO in Canadian history, I believe. And it's really, really struggling. I mean, at TELUS International, they reported revenue declines of 4%. Despite net income increasing due to the increase in share count, earnings were flat at $0.05 a share.

One of the main focus points for TELUS International is its debt. So back in 2022, they acquired Willowtree. They paid more than... It was September 2022. So right when... Not peak rates, I don't think, back then, but policy rates were still... They're being ramped up and they just went out and spent $1.25 billion on the company. I mean, it was viewed as pretty untimely. They had just reduced debt levels from they acquired Lionbridge's AI segment, I believe it was a few years prior. They spent multiple years paying down the debt and then they just kind of purchased Willowtree at a time when a lot of people didn't really like the acquisition just because of the environment they were in.

They're taking a big hit in terms of their debt is higher, their leverage ratios are higher, all that type of stuff. So they reiterated their guidance for revenue growth of 3% to 5%. And I think they usually isolate it and talk about how much they expect to grow with WillowTree and how much they expect to grow organically. They didn't mention this unless I completely missed it, but they expect to grow revenue by three to 5% and earnings to grow by seven to 13%. I would imagine this is including the willow tree acquisition, but like prior to, you know, the rate, the rate bumps and the slowdown in activity for TELUS international,

like this is a company that was growing at, you know, they were growing earnings, I believe, by 25%, 30% a year. Revenue was growing at 20-plus percent a year. And it's just been a really rough, rough time for Telus International post-IPO. I think they IPO-ed at something like, it was about $40, and they're currently trading at $882. Oh, okay.'s uh it's been pretty rough and like i said telus this impacts telus because telus they're a big shareholder big shareholder uh controlling interest and uh this was this was a big part of their uh their

growth engine yeah so what is willow tree i'm kind of looking at it so willow tree uh let me see here they have they have they have like a ton of huge customers i'd have to look it up i don't know why it's right off the top of my head like i know because we cover telus but they do here i'll look it up here okay yeah i'm looking at it willow tree right? So it's a way to, I guess... Like build websites. Help with digital marketing. Yeah. Yeah, stuff like that.

Yeah, okay. They do a whole ton of stuff and they work with a lot of like Fortune 500 companies, I believe, on like pretty much development, like website development, application development. I don't know too much about marketing, but maybe. Did you mention digital marketing? I'm not sure. Yeah, I think, yeah, I mentioned that. Did you mention digital marketing? I'm not sure.

Yeah, I think I mentioned that. No, it's funny because I Googled it. I wasn't familiar. And then this is what came up, which I was like, why would they buy this thing for over a billion dollars? So it's willowtreeapps.com, not willowtree.com, which is, I guess, figurines by Susan something. So a little different. When I Google willow tree, that's what it was. Oh, yeah, I was going to say that.

Why did they buy an ornament company? Yeah, I know. I was just like, I was a little confused, but, okay, that kind of shows that I don't follow TELUS all that closely. Yeah, software development, too, I think. No, I was just little confused, but okay, that kind of shows that I don't follow Telus all that closely. Yeah, software development too, I think. No, I was just curious. Yeah.

No, that's interesting. Yeah, no, I don't have too much to add. Obviously, like I said, I don't follow Telus that closely. I think for the most part, for me, I think it's something, you know, for any shareholders, you want to look at those interest payments, that that is going to be the same story for all the telecoms. You want to make sure that that debt is manageable and interest payments because at the end of the day they're just highly levered entities yeah and i mean telus is you know a bit more of like those higher growth verticals is kind of supporting it right now because they're you know they're low single digit right now maybe a little bit declining revenues whereas you know like we said

in the bce situation they have a lot, you know, like we said in the BCE situation, they have a lot more, you know, legacy style assets. They're selling off radio stations. You know, the whole business is kind of struggling where Telus kind of has a bit of stability in that mark. But I mean, I own Telus, like just a, it's like a 3% position on my portfolio. So I'm not like super, super bullish. I've owned it for quite a while. But regardless, it's just not. It hasn't been good for telecoms for quite some time now. A few years at least.

You're a dividend investor. The patty. It's all about the dividend. All about the patty. Yeah, and I think we'll leave it at this for today. I had cargo jet, but I think we'll keep that for next week just because I'm feeling pretty medium right now. My cold, I'm definitely, the meds are starting to wear off. So I think I'll

keep that for next week. So for those who are interested in that, tune in next Thursday. You know, thank you for everyone for listening. I do, we would appreciate feedback. We did that extra episode that'll be released essentially back to back days for earnings. So if you like that kind of stuff, to have an additional episode every once in a while when there's a lot of news and earnings, let us know. Because obviously it took a bit more time to research and so on. But if you like it, just let us know. If you don't, let us know as well because we do this for our listeners. Anything else you want to add there?

No, that's it. Thanks for listening, everybody.