Future Canadian retirees who contribute to the Canada Pension Plan (CPP) should welcome the news from their pension fund manager. The Canada Pension Plan Investment Board (CPPIB) announced it achieved a record 10-year annualized net return of 11.6% recently. In Q2 fiscal 2022 (quarter ended September 30, 2021), net assets grew $21.9 billion to $541.5 billion from Q1 fiscal 2022.
Apart from the $19.8 billion net income (after CPP investment costs), the total quarter-over-quarter increase includes $2.1 billion in net CPP contributions. CPPIB president and CEO John Graham said the strong results reflect the benefits of diversification and investment selection.
Graham added, “As we emerge from the impact of the global pandemic, our teams continue to execute across the organization to deliver sustainable long-term growth for the fund.” The fund manager’s mandate is to serve the best interests of CPP users. CPPIB continues to build a portfolio that would achieve a maximum rate of return without incurring undue risk.
Long-term view
Canadians who are saving and investing to supplement their CPP pension can adopt CPPIB’s investment strategy. Since the CPPIB’s primary duty is to create retirement security for generations of Canadians, the board maintains a long-term view. The approach is structured in such a way that it is resilient amid the changing economic and market conditions.
CCPIB’s investment portfolio includes TSX stocks. Among its holdings are Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) and Northland Power (TSX:NPI). Regular investors can consider taking positions in these stocks. Both are dividend payers, too.
Energy high flyer
Canadian Natural Resources is one of the high flyers in the red-hot energy sector. At $53.66 per share, current investors enjoy an 81.31% year-to-date gain on top of the 4.54% dividend. Note that this energy stock is a Dividend Aristocrat owing to 20 consecutive years of dividend increases.
This year is a complete turnaround for the $60 billion company. Management reported net earnings of $5.13 billion in the nine months ended September 30, 2021. It lost $1.18 billion in the same period in 2020.
Tim McKay, Canadian Natural’s president, said, “Our diverse product mix is a competitive advantage, as we can allocate capital to the highest return projects, without being reliant on any one commodity.” Its CFO, Mark Stainthorpe, credited the robust business model and diversified portfolio of world-class assets.
Strong growth in the decade
Northland Power is a growing $9.05 billion global power producer. It builds and operating clean and green power infrastructure assets, particular offshore wind projects. After three quarters in 2021, sales and net income dropped 7.3% and 69.4% versus the same period in 2020.
Mike Crawley, Northland’s president and CEO, said its three large offshore wind facilities had reduced financial contributions in Q3 2021. The reason was the abnormally low wind conditions in the North Sea. Nevertheless, from a strategic standpoint, management is confident NPI will advance and position itself for strong growth this decade.
The utility stock trades at $38.56 per share (-13.57% year to date) and pays a 3.11% dividend. Northland paid a total of $128 million in dividends thus far in 2020, notwithstanding the decline in net income.
Invest for the long term
CPP users should be thankful for CPPIB’s performance. They can also follow the board’s lead when investing for the long term.
