Editor’s Note: Please see our analysis of the latest news from our other Dividend Champions in the Portfolio Update section following the article below.

The falling Canadian dollar has been a major bummer for U.S. investors who once enjoyed a tailwind from a rising loonie. At the same time, it also means that those who are new to Canada’s investment story finally have an opportunity to buy Canadian stocks at a significant discount in U.S. dollar terms.

Thankfully, there’s also a way for both sets of investors to benefit from a lower exchange rate. Canadian firms whose operations have significant exposure to the U.S. can get an earnings boost when profits are translated back into Canadian dollars.

But one Canadian firm recently pulled off an even bigger feat–one that required the shrewdness to enter the U.S. market when values were abundant and the Canadian dollar was ascendant and the fortuitous timing to exit the U.S. market when the situation reversed.

When it comes to making macro calls like that, it’s exceedingly difficult to get the timing right. And yet the CEO of Canada’s biggest real estate investment trust, RioCan REIT (TSX: REI-U, OTC: RIOCF), managed to do just that.

Back in late 2009, RioCan CEO Edward Sonshine seized the opportunity to extend his shopping mall empire to the U.S., at a time when Canada’s neighbor to the south was still reeling from the aftermath of the real estate crash and the ensuing Global Financial Crisis.

Sonshine couldn’t resist what he saw as a classic market dislocation. Following the downturn, U.S. real estate prices were still low, especially compared to Canada, but most of the domestic players were still too busy shoring up their finances to take advantage of it. Meanwhile, Canada’s relative economic strength, thanks in part to its resource riches, had pushed the Canadian dollar to near parity with the greenback.

So Sonshine pounced. And he soon assembled a U.S. portfolio of 49 shopping centers in Texas and the Northeast that accounted for about 18.5% of the REIT’s gross leasable area and 17.8% of overall revenue over the trailing four quarters.

Then, as Sonshine put it, a happy accident occurred. The Canadian dollar’s slide accelerated just as the firm was preparing to undertake a strategic review of its U.S. assets.

While the rising U.S. dollar helped inflate the value of the U.S. portfolio in Canadian dollar terms, it was also making it too costly for RioCan to continue its expansion there.

Consequently, RioCan has agreed to sell its U.S. portfolio to the private-equity firm Blackstone for US$1.9 billion, or C$2.7 billion, a 57% return on its initial investment. The deal comes close to netting RioCan a cool billion in Canadian dollar terms.

“I won’t say we have been cheering [the Canadian dollar] down because that would be unpatriotic, but the trajectory of the dollar has certainly helped our decision-making,” Sonshine told the Financial Post.

Now Sonshine sees greater values emerging in Canada again. And he plans to put the proceeds to work there. First up is C$510 million to cover RioCan’s recent acquisition of 23 Canadian properties from its join-venture partner Kimco Realty Corp. The remaining balance will be used to pay down debt, which should help improve RioCan’s cost of capital in future financings.

Next, RioCan will focus on using the greater balance-sheet strength resulting from the deal to fund organic growth opportunities from its Canadian portfolio, with a development pipeline focused on intensification of its urban properties. That’s REIT speak for generating higher rental income by modifying a property to increase the number of tenants, typically by building up instead of out.

And naturally, Sonshine will also be on the lookout for good deals on other properties.

Despite the fact that RioCan’s U.S. venture was a “home run” in the words of one analyst, Bay Street still had to dock the REIT a few points for the fact that, at least temporarily, it will lead to slightly lower funds from operations (FFO).

Although the income from the Kimco properties and the interest saved from the debt reduction will replace two-thirds of the FFO generated by the U.S. properties, RioCan will still be missing out on around C$29 million in annualized FFO.

So analysts pared their forecasts for FFO per share for 2016 and 2017 by 5.1% and 6.6%, respectively. Perhaps as a consequence of those adjustments, RioCan’s units have dropped 3.6% in Canadian dollar terms since the deal’s announcement, in contrast to a 0.3% decline for the Bloomberg Canadian REIT Index and a 2.1% gain for the S&P/TSX Composite Index.

Nevertheless, we expect Sonshine to hustle fill that gap and then some.

Though RioCan’s projected growth is muted, its monthly distribution currently yields 5.8%. So investors are being well paid to wait for Sonshine to make his next home run.

Equally important, Sonshine understands the sanctity of the dividend. In an interview with the Financial Post in 2013, he acknowledged that during the global financial crisis the firm was under-earning its distribution, and he was facing tremendous pressure to cut it.

But Sonshine made a deal with the board to maintain the payout and then review it again in two years if the company didn’t experience a turnaround.

Defending that action, Sonshine said, “I just felt a lot of people were relying on [the distribution]. I felt we have this covenant with those people.”

RioCan is a buy below C$28/US$21 in the Dividend Champions Portfolio.

The Dividend Champions: Portfolio Update

By Deon Vernooy

The share prices of the three main Canadian telecoms came under pressure after Shaw Communications Inc. (TSX: SJRb, NYSE: SJR) announced the acquisition of WIND Mobile Corp. for C$1.6 billion. Shaw has bridging finance in place to cover the acquisition costs and intends to raise permanent capital through asset sales and equity and debt offerings.

The transaction is subject to various regulatory approvals, but is expected to close in the second half of 2016.

The price tag implies a very high enterprise value-to-EBITDA (earnings before interest, taxation, depreciation and amortization) ratio of 25.0x and a more modest $1.57/MHz per covered population.

Shaw, which owns and operates TV, landline and Internet networks, currently has no mobile-phone offering and has been struggling over the past few years to compete with full-service telecommunications providers.

WIND Mobile is a distant fourth-place among Canada’s wireless telecoms, with 940,000 subscribers. The main incumbents, BCE Inc. (TSX: BCE, NYSE: BCE), Telus (TSX: T, NYSE: TU) and Rogers Communications (TSX: RCI, NYSE: RCI) all have more than 8 million subscribers.

However, WIND has been growing quickly and added 47% net new subscribers over the past two years. But their technology is outdated and is known to result in dropped calls, poor service inside buildings and slow data-transmission speed. As a result, WIND’s average revenue per customer is 40% less than the major operators. Shaw indicated that WIND will upgrade to 4G/LTE technology by 2017, at an estimated cost of $250 million.

Investors are clearly concerned that Shaw will be able to substantially improve the attraction of the WIND mobile phone service to its own 3.2 million TV and Internet customers, resulting in increased competition and lower profits for all operators.

WIND has been around for several years now, with moderate success. Shaw may eventually succeed in attracting more customers from the main players, but this will take a long time and at considerable cost. In addition, we consider it unlikely that Shaw will want to enter into a price war with the incumbents, which have much larger balance sheets, and are well-entrenched operators and formidable competitors.

However, it is likely that competition among the national mobile phone operators will increase even further from 2017 onward, with a modest negative impact on profitability. We have therefore reduced the fair values on Telus and BCE by 8% and 5%, respectively.

We note that the CEO of Telus in combination with a family trust bought C$10 million worth of Telus shares after the recent price decline and consider that as a very positive sign.

The Dividend Champions Portfolio holds both BCE and Telus. Telus, which we profiled in the November issue of Canadian Edge and highlighted as a “Best Idea For New Money,” now yields 4.3%, with a fair-value estimate of C$46/US$33. BCE has a fair-value estimate of C$63/US$47.

Fortis Inc. (TSX: FTS, OTC: FRTSF) declared a first-quarter 2016 dividend of $0.375 per share payable on March 1, 2016 to shareholders of record on Feb. 17, 2016. This is 10% higher than the previous year.

With a current yield of 4%, Fortis remains our favorite Canadian utility. Fortis has a fair value of C$40/US$29.

InnVest REIT (TSX: INN-U, OTC: IVRVF) announced the acquisition of the high-end Ottawa Marriott Hotel for C$115 million. The transaction, which is expected to close in the first quarter of 2016, provides a capitalization rate of 6.5% and will be financed with a mortgage, other finance and cash on hand.

At the same time, the trust announced the intended sale of several properties that are expected to deliver net proceeds of C$64 million.

Although the debt level of the trust is on the wrong side of our comfort level, InnVest’s reorganization and upgrading of its hotel portfolio is still a work in progress. With a yield of more than 7% and improving international tourism numbers, we are comfortable holders of the units in the Dividend Champions Portfolio. InnVest has a fair value of C$6/US$5.