Many technology gurus have argued that the Internet of Things (IoT) will be the dominant technology of the future. We have already seen significant IoT investments by many of the world’s technology giants, including Alphabet (Google), Amazon, and Microsoft, as these companies strive to become market leaders.

Consumer-focused IoT products such as smartwatches, smart TVs, and smart home products are already ubiquitous in the marketplace. Smart appliances, connected cars, and remote tracking devices are expected to become commonplace in the years to come.

IoT will make business more efficient in many different ways. For example, retailers will use it to improve inventory management by embedding radio frequency identification devices in products to track when they are sold and to automatically order more, and manufactures will use it to collect data from machines to diagnose mechanical problems.

Governments and municipalities will also utilize IoT. One often-discussed application is to design smart cities. These smart cities could utilize IoT to make traffic lights more efficient, notify the public of open parking spaces, and boost electricity to areas that most need it.

With so many potential applications, IoT represents an enormous market opportunity. In a 2017 report, the U.S.-based research and advisory company Gartner estimated that the number of connected things will increase from 11.2 billion units this year to 20.4 billion units in 2020, while IoT hardware spending will increase from US$2.1 trillion to US$2.9 trillion over the same period.

Investors looking to capitalize on the IoT market should carefully consider Sierra Wireless (TSX:SW)(NASDAQ:SWIR). Sierra can be described as a “pure-play” IoT company. The company is a market-leading supplier of embedded modules that allow devices to wirelessly connect to networks and/or other devices. Sierra also sells secure networking hardware such as routers and gateways and provides cloud services that can be used to manage connected devices, IoT subscriptions, and over-the-air updates.

In 2017, Sierra recorded US$692.1 million in revenue and an adjusted EBITDA of US$54.2 million, which represent an increase of 12.4% and 23.4%, respectively, over 2016. The company continues to grow this year; its second-quarter revenue and adjusted EBITDA increased by 16.4% and 4.7%, respectively, over the corresponding period last year.

The company has a relatively strong balance sheet with a current ratio of 1.6, a quick ratio of 1.3, and virtually no long-term debt.

Bottom line

IoT brings together wireless connectivity, cloud computing, and big data. This technology is rapidly entering the mainstream, and its growth prospects are undeniable. This growth could rapidly accelerate as more applications are developed and legitimate security concerns are addressed.

Growth investors who are looking to make an IoT play should consider Sierra Wireless. As a global leader in embedded modules, routers, and gateways, Sierra is well positioned to capitalize on the rapid growth in IoT devices. Its stock, which traded as high as $39.79 per share mid last year, is currently at around $28 per share. This price represents an attractive entry point for IoT investors with a long time horizon.

The post IoT Could Become the Hottest Game in Tech: Get In on the Action With This Canadian Player appeared first on The Motley Fool Canada.

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Do you need to add a little sizzle to your underperforming portfolio? I suggest that you consider buying some high-growth stocks. Allow me to introduce you to two candidates that have been lighting up the TSX in recent years: Boralex (TSX:BLX) and Kinaxis (TSX:KXS).

Boralex Inc.

• Three-year stock price change: +66%
• Year-to-date stock price change: -15%
• Market cap: $1.5 billion
• 2017 revenue: $419 million
• Five-year revenue compound annual growth rate (CAGR): +19.5%
• Year-over-year revenue increase for most recent quarter: 4.3%

Boralex develops, constructs, and operates renewable energy power facilities. The company generates a total 1,619 MW of power; 86% is generated from wind, 10% from hydro, 3% from thermal, and about 1% from solar. Boralex generates 46% of power in Canada, 49% in France, and 5% is generated in the United States.

Boralex’s rapid growth has been due to aggressive project development and acquisitions. Boralex has recently closed its acquisition of the French wind power company Kallista Energy Investment and has entered an agreement to acquire Invenergy Renewables’s interest in five Quebec wind farms. These acquisitions will quickly increase the company’s generating capacity by 25%.

The company should continue its rapid growth in the years to come. Boralex currently has 14 projects in either the construction or ready-to-build stage that will add 244 MW of power by 2020. Another 10 projects are in the proposal/development stages, which will add an estimated 905 MW of capacity going forward.

The recent pullback in Boralex’s stock price represents a great buying opportunity. As an added bonus, the company recently increased its dividend by a total of 10% this year. The current dividend yield of 3.2% is unusually high for a growth stock.

Kinaxis Inc

• Three-year stock price change: +155%
• Year-to-date stock price change: 24%
• Market cap: $2.5 billion
• 2017 revenue: US$133 million
• Five-year revenue CAGR: +16.9%
• Year-over-year revenue increase for most recent quarter: 18.6%

Kinaxis is a software company that offers cloud-based solutions for supply chain and sales and operations planning. The company is best known for its RapidResponse platform, which is currently one of the fastest-growing supply chain management systems.

Kinaxis’s growth has coincided with increased globalization and outsourcing, which has significantly increased the complexity of supply chains. Kinaxis targets customers across diverse industries, including automotive, electronics manufacturing, pharmaceuticals, technology, defence, and consumer packaged goods.

The company derives almost 80% of its revenue from subscriptions, which has grown at an impressive CAGR of 25% for the last three full financial years. Kinaxis has had excellent revenue retention, which reflects its success in keeping and expanding relationships with existing customers.

In addition to its success in maintaining its existing customer base, the company has utilized its direct sales force and indirect sales channels to rapidly expand its customer base. Impressively, 65% of the company’s growth over the last few years has been from new customers.

Going forward, Kinaxis will continue to focus on increasing revenue through expansion of its customer base. Almost 90% of Kinaxis’s revenue is derived from North American-based customers, which means that it has a huge international expansion opportunity.

The company is forging and expanding alliances with some of the world’s leading consultancy firms, such as Accenture, Bain & Company and Deloitte, that should help it expand its global reach.

Bottom line

The renewable energy market is picking up steam, particularly in Europe. Boralex is poised to take advantage and should continue its impressive growth for years to come.

Kinaxis has been one of Canada’s tech darlings for the last few years. It has a strong client base, a successful subscription revenue model, and a proven sales team.

Both of these growth stocks would be good additions to your portfolio.

The post Turbocharge Your Portfolio With These High-Growth Stocks appeared first on The Motley Fool Canada.

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It has been reported that the U.S. is seeking longer data protection for a class of drugs called “biologics.” A longer period of protection means that a generic drug maker would have to wait longer before it can introduce a competing biologic drug into the marketplace.

Biologics are drugs that are composed of or derived from biological molecules, cells, or tissues. Current protection for this class of drugs is eight years, but it has been reported that the U.S. wants this extended to 10 years.

The market for biologic drugs is huge. According to a 2017 report by the Patented Medicine Prices Review Board (PMPRB), a Canadian government agency that regulates the prices of patented medicines, biologic drug sales in Canada totaled $7 billion in 2017.

Furthermore, as stated in the PMPRB report, the market share (by revenue) of biologic drugs is on the rise; it has increased from 16% in 2009 to 42% in 2017.

As you can imagine, pharmaceutical companies are lobbying hard for longer biologic drug data protection, which would help to offset increasing R&D costs and boost profit.

Two Canadian pharmaceutical companies that would benefit from longer biologic drug patent protection are Zymeworks Inc. (TSX:ZYME)(NYSE:ZYME) and Prometic Life Sciences Inc. (TSX:PLI).

Zymeworks is a Vancouver-based clinical-stage biopharmaceutical company that develops and commercializes multifunctional biotherapeutic drugs. The company’s revenue, which has grown by an impressive compound annual growth rate (CAGR) of 126% over the last four years, was US$51.8 million in 2017. The company reported a net loss of US$10.4 in 2017, which was an improvement from its reported net loss of US$33.8 million in 2016.

In the second quarter of this year, Zymeworks reported revenue of US$22 million and a net loss of US$5.9 million, which were an improvement over its reported revenue of US$1.3 million and net loss of US$11 million in the corresponding period last year.

Prometic Life Sciences is a Laval-based biopharmaceutical corporation that specializes in drug discovery for the treatment of rare and orphaned diseases and in the purification of biopharmaceuticals from human plasma. Revenue, which reached $39.1 million in 2017, has increased by a CAGR of 13% since 2013. Prometic reported a loss of $109.7 million in 2017, slightly more than the reported $100.8 million loss in 2016.

Prometic’s second-quarter revenue increased from $3.6 million in 2017 to $20.2 million in 2018. The company’s 2018 second-quarter net loss of $33.1 million was slightly higher than the net loss of $31.5 million it reported for the corresponding period last year.

Investor takeaway

NAFTA negotiations are still ongoing, and it is likely that Canada will object to the proposed increase in data protection for biologic drugs over fears that it will dramatically increase healthcare costs.

However, Canada will undoubtedly have to compromise in order to get the NAFTA deal done. Will patent protection for biologics be one area of compromise? Investors should keep their ears to the ground and their eyes on Zymeworks and Prometic Life Sciences.

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AltaGas

AltaGas is a diversified energy infrastructure company that is headquartered in Calgary. The company has three business segments: gas, power, and utilities. Its gas segment is involved in natural gas gathering and processing as well as natural gas liquid (NGL) extraction and fractionation, storage, transmission, and the marketing of natural gas and NGL.

AltaGas’s power segment supplies energy generated from natural gas, hydro, wind, and biomass. The company’s utility segment provides natural gas to homes and businesses across North America.

AltaGas’s 2017 revenue came in at $2.6 billion, while net income was $91.6 million. For the second quarter of 2018, the company reported revenue of $609.8 million and a net income of $17.8 million. The company has a strong dividend history; it has increased dividend payments every year since 2011.

The company’s trailing 12-month dividend-payout ratio is very high at 675%. Payout ratios for the 2017, 2016, and 2015 financial years were also well over 100%. These consistently high payout ratios immediately raise red flags and suggest that AltaGas’s dividend payments may not be sustainable.

Before we make our conclusions, let’s take a look at the free cash flow payout ratio (defined as dividend/free cash flow, and expressed as %), as this is often a better indication of dividend sustainability. For the last 12 months, this ratio is 630%, while it was over 800% for financial year 2017. This analysis indicates that AltaGas’s current free cash flow is not nearly enough to pay its dividend.

Pattern Energy Group

Pattern Energy is an independent U.S.-based renewable energy company that owns and operates wind and solar power projects. Revenue is derived from selling electricity and renewable energy credits. The company has utility-scale projects in the United States, Canada, Japan, and Chile. Since its IPO in 2013, the company’s revenue has more than doubled, reaching US$411 million for the 2017 financial year.

For the past four consecutive quarters, Pattern recorded a total revenue of US$454 million, a net income of US$131 million and a dividend-payout ratio of 135.9%. Its current free cash flow payout ratio is 98%, which is much lower than AltaGas’s. Pattern’s dividend per share has steadily increased over the past five years.

TransAlta Renewables

TransAlta Renewables is a Calgary-based company that owns and operates renewable power-generation facilities including wind, hydro, and gas. Its facilities are located in Australia, Canada, and the United States. TransAlta’s year-over-year revenue increased by 84% to $441 million in 2017, while net income was $9 million.

TransAlta has increased its dividend every year since 2013. The company’s trailing 12-month dividend-payout ratio is high at 275%; however, its free cash flow payout ratio over the same period is reasonable at 86%. This suggests that the company’s operations currently generate enough free cash to sustain its dividend payments.

Verdict

Income investors hunting for high dividend yield stocks should ensure that the relevant companies generate enough free cash flow to sustain dividend payments. If dividend payments exceed free cash flow for a long period, then the company may be forced to reduce capital expenditures, sell assets, and/or raise additional funds through debt or equity financing, all of which could negatively impact growth and/or stock price in the long term.

Both Pattern Energy Group and TransAlta Renewables have a reasonable free cash flow payout ratio and have historically increased dividend payments each year. These facts combined with impressive recent revenue growth make these two companies great options for income investors.

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To correct the damage, Laurentian Bank has had to repurchase the offending mortgages from the third party and the CMHC for a combined total of $518 million.

Laurentian Bank’s problems were compounded by its third-quarter financial results, which were below analysts’ expectations. For the quarter, net income was flat, return on common shareholders’ equity declined from 11.8% to 9.2%, and diluted earnings per share (EPS) declined by 17% compared to the corresponding period last year. The poor financial performance was largely due to increases in non-interest expenses including acquisition costs and salaries.

These factors have had a negative impact on Laurentian Bank’s stock price, which has fallen by more than 29% since last December to its lowest level in more than five years.

Is it time to jump in and pick up this stock at a discount? Here are three reasons why I think you should take the plunge and buy this stock.

Laurentian Bank’s mortgage problems have been rectified

Laurentian Bank recently completed a comprehensive review of its mortgages and the results were independently verified. Management is confident that the problems related to the incorrect mortgage sales have been resolved and that no additional repurchases will be required.

It appears that both the third-party purchaser and the CMHC are satisfied with Laurentian Bank’s response. The CMHC’s securitization programs remain available to Laurentian Bank and have been utilized throughout this year.

Laurentian Bank has stated that the repurchases will not have a material impact on its business, operations, capital, liquidity or funding. In fact, it’s likely that Laurentian Bank will emerge stronger given that its mortgage problems have led to improved quality controls and loan underwriting procedures.

The long-term trends are positive

Laurentian Bank’s revenue and its adjusted EPS have increased steadily over the last 10 full financial years with solid compound annual growth rates of 4.7% and 4.8%, respectively. Additionally, its three-year total shareholders return of 11.46% is higher than the average return of the Big Six banks.

Although non-interest expenses increased in the third quarter of this year, Laurentian Bank’s operations have generally become more efficient over the years. Its efficiency ratio (defined as non-interest expenses/revenue) in 2017 was 69.2% versus 80.6% in 2015. It is likely that Laurentian Bank will continue to focus on efficiency, which will help to drive profits in the long run.

Laurentian Bank’s dividend yield is almost 6%

With the recent fall in share price, Laurentian Bank’s dividend yield has increased to 5.9%. This yield is significantly higher than those currently on offer from the Big Six banks.

Laurentian Bank’s dividend policy has typically been friendly to shareholders; the dividend per share has increased every year for the last 10 years at an impressive compound annual growth rate of 7.3%. Current dividends should be very safe since the payout ratio is quite low at only 44%.

Investor takeaway

Laurentian Bank currently has a P/E ratio of eight and a price-to-book ratio of 0.8. These ratios are much lower than the corresponding industry averages and suggest that the stock is likely close to its price floor. Given Laurentian Bank’s solid fundamentals, the stock seems like a bargain.

At its current price, Laurentian Bank’s stock is a good buy for long-term value investors who can hold the stock for years and enjoy a great dividend yield while they wait for a price rebound.

The post This Bank Stock Could Be the Best Bargain on the TSX appeared first on The Motley Fool Canada.

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Recession-proof stocks are usually found in industries that provide essential products or services. One such industry is long-term care facilities. Companies in this industry are poised for meteoric growth because of favourable demographic trends.

There is tremendous demand for long-term care services in Canada. In Ontario alone, there are more that 30,000 people on the waiting list for these services. With 8.5 million people over the age of 60, the demand will only grow in the years to come.

Let’s take a closer look at three of the biggest companies in the Canadian long-term care industry: Chartwell Retirement Residences (TSX:CSH.UN), Sienna Senior Living (TSX:SIA) and Extendicare (TSX:EXE).

Chartwell Retirement Residences

Chartwell operates 195 communities. Its total revenue in 2017 was $800 million and adjusted net operating income (NOI) was $282 million, corresponding to an impressive operating margin of 35%.

74% of revenue is from retirement operations, which have a very high operating margin of 39%. These operations support independent living by providing age-qualified suites, townhouses or bungalows with housekeeping, meals/dining, laundry services, and personal assistance.

The remaining 26% of revenue comes from long-term care operations, which provide more extensive 24-hour bedside nursing care. Chartwell’s long-term care operations have a much lower operating margin of 13%.

Recent growth has been very good. Resident revenue and adjusted NOI increased by 9.2% and 10.5%, respectively, for the first six months of this year compared to the corresponding period last year.

Sienna Senior Living Inc.

Sienna operates 85 communities. In 2017, total revenue was $558 million and NOI was $118 million. Sienna is more reliant on its long-term care operations than Chartwell.

Long-term care accounts for 80% of Sienna’s revenue, while 20% comes from the more lucrative retirement operations. As a result, Sienna’s overall operating margin of 21.2% is 65% lower than Chartwell’s.

To increase its overall operating margin, Sienna has focused on increasing its retirement operations through acquisitions. For the first six months of this year, retirement revenue increased by over 90%, while total revenue and NOI increased by 13.2% and 26.2%, respectively, compared to the corresponding period last year.

Extendicare Inc.

In addition to resident-based long-term care and retirement operations, Extendicare also provides home healthcare and purchasing services for clients. Total revenue in 2017 was $1.1 billion, while total NOI was $135.8 million.

The company operates 120 communities. Extendicare’s ParaMed home healthcare service delivers an average of 30,000 hours of care per day.

56% of revenue is from long-term care, 39% from home health care, 3% from retirement living operations, and the rest is from management consulting and purchasing operations.

Extendicare’s long-term care and home healthcare operations have operating margins of 11.6% and 11.4%, respectively, which accounts for the company’s relatively low overall operating margin of 12.3%. For the first six months of this year, revenue increased by 1.5%, while NOI was flat compared to the corresponding period last year.

Similar to Sienna, Extendicare has recently focused on expanding its retirement operations to boost its operating margins. It currently has three new locations in development.

Which should you buy?

Given current demographic trends, all three stocks would make excellent additions to your portfolio. Chartwell has been favoured by investors recently due to its significantly higher operating margins. However, its price-to-sales ratio of 3.9 is the highest of the three companies and its dividend yield of 3.8% is the lowest.

With dividend yields of 5.1% and 5.8%, respectively, Sienna and Extendicare are very attractive for income investors. Both companies could grow rapidly if investments in retirement operations continue. Overall, Extendicare’s low price-to-sales ratio of 0.7, along with its diversified operations and high dividend yield, offers the best mix of value, safety, and income.

The post These Recession-Proof Retirement Stocks Have Huge Growth Potential appeared first on The Motley Fool Canada.

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“Buy, hold, and prosper” is an effective investment strategy with the added benefit of reducing some of the anxiety associated with the daily fluctuations of stock market tickers. It is best executed by investors with a long time horizon that are prepared to ride out recessions and changing business cycles. Thus, the strategy depends on picking fundamentally strong companies that offer products and/or services that will be relevant in the future.

Two stocks that you can confidently buy and hold right now are BCE (TSX:BCE)(NYSE:BCE) and TFI International (TSX:TFII).

BCE Inc.

BCE is the quintessential blue-chip company. It has had 51 consecutive quarters of year-over-year adjusted EBITDA growth, and its Bell brand is ubiquitous in Canada. However, its stock price has declined from about $62 last December to about $54 in April, where it has remained ever since.

The decline is due to investor concerns about growth and rising interest rates, which will increase the company’s cost of capital. This is compounded by the fact that prices of low-growth, blue-chip stocks tend to decline as interest rates rise, because investors are enticed to shift their money to the bond market.

It appears that the sell-off is complete, since the stock’s 200-day moving average is very close to its current price. Investors have also been reassured by the company’s recent second-quarter earnings report, which contained some positive news.

The report highlighted the net addition of over 122,000 postpaid wireless subscribers, representing the company’s best performance in this metric since 2000. Average billing per user increased by 0.6%. Surprisingly, over 20,000 new IPTV customers were added, which more than offset the loss of satellite TV subscribers. Overall, revenue increased by 1.7% compared to the corresponding period last year.

At its current stock price, BCE is an attractive target for long-term income investors. It has a great dividend yield of 5.6% and a reasonable P/E ratio of less than 18. The company’s dividend policy calls for modest payouts of 65-75% of free cash, which means that BCE can easily increase dividends to shore up its stock price if necessary.

TFI International Inc.

TFI International is a leading transportation and logistics firm that serves U.S., Canadian, and Mexican markets through several wholly owned subsidiaries. It has four operating segments: package and courier, less than truckload, truckload, and logistics.

The company has been experiencing solid growth. Revenue and operating income have increased at compound annual growth rates of 11% and 14%, respectively, from 2013 to 2017.

Management’s recent focus on improving the quality of revenue and controlling costs is starting to bear fruit. For the first six months of this year, operating income has increased by a whopping 61% compared to the corresponding period last year.

This solid revenue and income growth is reflected in the recent performance of the stock. TFI’s stock price has increased nearly 58% over the last 52 weeks, and it is now trading close to its all-time high.

Despite this recent surge in stock price, it’s not too late to buy. The company’s current P/E ratio of 12.5 is still quite reasonable and is in line with the industry average. In fact, given the recent growth in revenue, you could argue that the stock remains undervalued.

TFI’s current dividend yield of 1.8% is not attractive to long-term income investors, but its future growth should continue to drive its stock price for years to come. The company will benefit from strong U.S. economic growth and the rise in ecommerce, which should increase the demand for its services.

Bottom line

BCE offers an attractive dividend, and its products and services will continue to be relevant. TFI offers solid growth and is well positioned to capitalize on current economic trends. Both stocks are great choices for long-term investors who are looking to balance income and growth.

The post Buy, Hold, and Prosper: 2 Great Stocks for Long-Term Investors appeared first on The Motley Fool Canada.

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All three companies fulfill the following criteria:

• A beta value of less than one, which is an indicator of low market volatility and reduced risk.
• A strong history of dividends with current annual yields exceeding 4%.
• A minimum of 5% compound annual growth rate (CAGR) in revenue from 2014 to 2017.

The three companies are Northland Power (TSX:NPI), RioCan Real Estate Investment Trust (TSX:REI.UN), and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM).

Northland Power Inc.

Northland is well positioned to capitalize on the green revolution. It is a Toronto-based company that develops, builds, owns, and operates clean and green power projects in Canada, Europe, and other international markets. Northland’s power plants produce electricity from clean-burning natural gas and renewable sources such as wind, solar, and biomass.

Northland has a forward annual dividend yield of approximately 4.8%. These dividend payments are likely sustainable given that they only represented 57% of free cash for the first six months of this year.

From 2014 to 2017, the company’s revenue has grown at an impressive CAGR of almost 22%.

Revenue is up over 20% for the first six months of this year compared to the corresponding period last year. Revenue is likely to continue its upward trend in the coming years, as the company expands its generating capacity with the Hai Long Offshore Wind Project in Taiwan and the Deutsche Bucht Offshore Wind Project in Germany.

RioCan Real Estate Investment Trust

With 45 million square feet of retail-focused, leasable property across 294 locations in Canada, RioCan is one of the largest real estate investment trusts in Canada. Its tenants include some of the country’s biggest retailers, and its occupancy rate is an impressive 96.8%.

RioCan’s forward annual dividend yield is currently at 5.7%. Its moderate dividend-payout ratio of 68% should be easily sustainable. Revenue increased at a CAGR of 5.9% from 2014 to 2017.

Moving forward, RioCan should benefit from recent growth in the Canadian economy and low unemployment, which should drive retail demand in the short to medium term. In the long term, investors should keep an eye on the rise of ecommerce in Canada, which could affect the demand for physical retail locations.

Canadian Imperial Bank of Commerce

As one of the Big Five Canadian banks, CIBC has long been a safe investment. CIBC currently offers a forward annual dividend yield of 4.5%, the highest of the Big Five banks. Its 2014-to-2017 yearly revenue CAGR of 7.5% is also the best among the Big Five.

Despite slowing mortgage growth, CIBC’s net income rose 26% in the second quarter of 2018 compared to the corresponding period last year. Furthermore, CIBC’s P/E ratio and PEG ratio are the lowest of the Big Five, suggesting that its stock is currently undervalued.

Investor takeaway

Income investors often have to choose between companies with good dividend yields or reasonable revenue growth. These three stocks represent a good mix of both and could be valuable additions to your investment portfolio.

The post Boost Your Retirement Nest Egg With These 3 Stocks appeared first on The Motley Fool Canada.

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In a nutshell, the falling stock price is due to dwindling theatre attendance. Attendance at Cineplex’s 163 movie theatres peaked at 77 million in 2015 but has declined in each of the last two years, hitting 70.4 million in 2017. This decline can be attributed to the recent slate of uninspiring movies, but some have also blamed the rise of streaming services like Netflix, Inc. Unfortunately, things did not look any better in the first quarter of 2018 as attendance decreased by over 9% compared to the same period last year.

There is some good news. It seems like attendance is turning around; data from Box Office Mojo shows that box office revenue increased by almost 22% in the second quarter of 2018 compared to the same period last year. This positive data should be reflected in Cineplex’s second-quarter results, which is due on August 10. There’s no doubt that the threat from streaming services is real, but recent results from Netflix showing slowing subscriber growth suggests that this threat may be somewhat overblown.

Despite the summer turnaround in attendance, it’s clear that Cineplex needs to become less reliant on Hollywood. The company has tried to diversify by expanding its amusement business, which includes gaming and vending machine installation and operation. This strategy is working; since 2013, amusement revenue has increased from 0.6% of total revenue to about 12% of total revenue today. In contrast, revenue from movie ticket sales has declined from 57.6% of total revenue to about 46% of total revenue over the same period.

Diversification will continue over the next several years, as Cineplex expands its Rec Room concept, which combines dining, live entertainment, and gaming under one roof. The company opened three new Rec Rooms in 2017 and is on track to open 10-15 new locations over the next few years. The company is relaunching its arcade gaming Playdium brand concept and plan to open 10-15 Playdiums over the next few years.

In order to combat the threat from streaming services, Cineplex needs to offer a cinematic experience that’s not easily duplicated at home. Virtual reality (VR), which can provide an interactive experience that combines cinema and gaming, could potentially be the vehicle that gets people back to the theater.

Cineplex now offers VR experiences at Scotiabank Theater Ottawa and Scotiabank Theater Toronto. The company is partnering with The VOID to open at least five new VOID Experience Centres that will combine VR, smell, and touch for a truly immersive experience. These investments are key to the long-term growth of the company.

The bottom line

Cineplex has been making solid progress as it executes its strategy to diversify its revenue streams and invest in technology designed to offer its guests a more immersive cinematic experience. This should drive revenue growth and the stock price in the medium to long term.

Cineplex offers an attractive annualized dividend of $1.74 per share, which corresponds to a forward dividend yield of 6% at its August 3rd closing stock price of $28.20. With a 2017 financial year adjusted free cash flow per common share of $2.37 and Cineplex’s long history of annual dividend increases, it’s likely that these dividend payments are safe, at least in the medium term. Now seems like the perfect time for investors to buy this stock and lock in this attractive dividend yield.

The post Buy This Dividend Aristocrat Before it’s Too Late! appeared first on The Motley Fool Canada.

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If you’re looking for a new pharma stock with high growth potential but are concerned about the high risks that are typically associated with the pharmaceutical industry, you should carefully consider Knight Therapeutics (TSX:GUD).

Knight Therapeutics is a Montreal-based speciality pharmaceutical company that was spun off from the hugely successful Paladin Labs in 2014. The company is focused on acquiring, in-licensing, selling, and marketing pharmaceutical products, customer health products, and medical devices in Canada and in select international markets. It also finances other pharmaceutical and life science companies, giving it additional product distribution rights.

Knight Therapeutics’s 2017 revenue and net income was $8.6 million and $17.2 million, respectively. The company can be categorized as high growth, with revenue growing at a compound annual growth rate of 187% from 2014 to 2017.

Knight Therapeutics’s stock price has seen a slight uptick in 2018, but it’s still currently about 20% off its February 5, 2017, all-time high of $10.84 per share. Investors have been cautious because of the company’s high P/E ratio of over 60. Some believe that future growth projections do not justify such a high P/E. However, a closer look at the fundamentals of the company suggests that this might be the perfect time to buy.

Here are five reasons why Knight Therapeutics could be poised for takeoff.

It has a solid business plan that minimizes risk

Unlike many competing firms, Knight Therapeutics does not invest heavily in risky in-house, early-stage drug development. Instead, the company accesses new breakthrough drugs through its strategic investments and lending. This means that it has lower operating expenses and less need for expensive physical infrastructure and equipment.

It continues to have one of the best balance sheets in the business

The company has over $760 million in cash and marketable securities (75% of total assets) and no long-term debt. It has more than enough cash to cover its short-term liabilities and make future investments that will drive growth.

Its current price-to-book ratio is low

Knight Therapeutics’s average price-to-book ratio over the last five years is almost 1.4 compared to the current price-to-book ratio of around 1.2. Since most of its assets are liquid, the stock is probably close to its price floor right now.

Its loan portfolio continues to yield attractive returns

Knight Therapeutics’s strategic investments are often in the form of secured loans. These loans typically yield low double-digit interest rates and, in fact, are currently the main source of income for the company.

High revenue growth should continue as new drugs come through its pipeline

In the first quarter of 2018, Knight Therapeutics reported revenue of $3.15 million, which was 80% more than the previous quarter. The company is steadily building up its product portfolio. In early 2018, it received regulatory approval in Canada for Probuphine, a drug that treats opioid dependence. There are several products in phase II and III. These new products should allow the company to maintain its growth trajectory.

Overall, if you are looking for a pharma company with a great risk/reward balance, Knight Therapeutics is a solid choice.

The post 5 Reasons Why This Pharma Stock Is Poised for Takeoff appeared first on The Motley Fool Canada.

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