The Globe and Mail reports in its Wednesday edition that after several years of sluggish growth and falling interest rates, growth is picking up and interest rates are once again on the rise.
The Globe's John Heinzl writes that for portfolio managers such as Darren Sissons, the new environment presents opportunities.
"The market is transitioning towards a more growth-oriented theme," says Mr. Sissons at Campbell Lee & Ross. While that bodes well for certain sectors such as banks, it is putting pressure on the telcos and consumer staples, he says.
Mr. Sissons likes Bank of Nova Scotia which, at $77.32 a share, yields 4.1 per cent.
Banks benefit from rising interest rates because they improve their net interest margin -- essentially, the difference between what they make on loans and what they pay out on deposits. With about two-thirds of Bank of Nova Scotia's loan book subject to floating interest rates, the bank stands to benefit immediately from the BoC's two recent hikes. Furthermore, the recent rise in rates "will progressively drive earnings higher for the longer-dated loan maturities," Mr. Sissons says. Higher earnings, in turn, should support continued dividend increases at Scotiabank.
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