Welcome to Pandemic Portfolio, a biweekly series from Corporate Knights and the Toronto Star that looks at companies relatively well positioned to weather the economic storm triggered by COVID-19.
The Bank of Canada struck an optimistic note in its April Monetary Report, suggesting that “Canada’s economy will begin to recover as the health impacts of COVID-19 fade, businesses begin to reopen and gradually resume their operations, and people start returning to their normal lives.”
Of course, uncertainty remains over if, how and when the economy will return to pre-crash levels. The bank’s report highlighted unprecedented levels of monetary and fiscal stimulus but also noted concerns about historically low oil prices, a surge in unemployment and sharply lower business and consumer confidence.
Without the ability to forecast with confidence, we should prepare for the recovery period to drag on for some time and continue to examine greener companies that are expected to profit during a longer period of pandemic-induced economic pain.
Note: These are investment ideas, not recommendations. Speak to a financial professional before investing and ensure that any holdings are part of a more diversified investment strategy.
McCormick & Company
With restaurants closed, home chefs are having their moment. Unfortunately, we’re not all great cooks. I’m leaning heavily on my spice cabinet to make my home-cooked meals a little tastier. When in doubt, throw a little hot sauce in the dish! McCormick & Company is a spice and flavour manufacturer that sells a wide array of spices, condiments and sauces. You’ll likely recognize some of its popular household brands, like Old Bay seasoning, French’s condiments, Thai Kitchen and Frank’s hot sauce. The company is well positioned to benefit as families keep eating at home.
In 2017, McCormick set impressive sustainability goals, such as slashing its greenhouse gas emissions by 20 per cent, sourcing all herbs and spices sustainably, and committing to making 100 per cent of its plastic packaging reusable or recyclable by 2025. The company has a long way to go in meeting these goals, but I’ll give it the benefit of the doubt, since its environmental, social and governance (ESG) scores from the Corporate Knights research arm, as well as MSCI and Sustainalytics, are among the best in its sector. Furthermore, McCormick ranked 22nd on the 2020 Corporate Knights Global 100 Most Sustainable Companies in the World.
McCormick’s share price fell by 32 per cent with the rest of the market during the crash but has rebounded nicely and sits down just five per cent since the start of the year. The stock is expected to pay a 1.58 per cent annual dividend. (Scorecard below)
Renewable energy utilities are in the enviable position of having consistent cash flows, since they have long-term purchase price agreements that set a fixed price on the electricity they generate. Northland Power, headquartered in Toronto, is one such utility. With a mix of solar, wind and thermal (natural gas) projects, the company’s cash flows shouldn’t suffer if the pandemic’s stay-at-home orders persist.
Most of Northland’s facilities generate renewable energy, but about 26 per cent of its revenues come from natural gas. This will be a turnoff for some green investors, while others will appreciate a diversified approach. I’m disappointed that Northland has taken a step backward in its ESG data disclosure. The company produced a 2018 Sustainability Report but didn’t disclose any information for 2019. This lack of ESG disclosure could hurt them as investors increasingly incorporate the data into investment decision-making. Still, generating 74 per cent of revenues from renewable energy is enough to make me feel good about this stock.
Northland’s share price fell by 36 per cent during the crash but bounced right back and is up almost 13 per cent since the start of the year. The stock is expected to pay a 3.91 per cent annual dividend. (Scorecard below)