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

The Canadian dollar didn’t always march in lockstep with the price of oil. Historically, in fact, the loonie’s movement has been largely independent of crude prices.

But the global commodities super cycle, which began early last decade and began unwinding over the past three years, changed all that.

The currencies of resource-rich countries such as Canada were seen as implicitly backed by hard assets, a concept that held great appeal in a post-2000 world where paper values have repeatedly proved ephemeral.

Of course, just like any other asset, resources go through their own dramatic boom-and-bust cycle. The boom phase pushed the Canadian dollar above parity with the greenback, briefly confounding Americans who were accustomed to ridiculing the looney as nothing more than Monopoly money.

But even during the energy boom, the loonie only loosely tracked the price of oil. More recently, however, as crude’s crash deepened, their movements tightened considerably, especially during the fourth quarter, and particularly during January.

A little more than two weeks ago, both the Canadian dollar and North American benchmark West Texas Intermediate crude (WTI) hit their lowest levels since 2003.

Then, finally, we got some relief.

A Geopolitical Intervention

First, Russia made a characteristically cynical play by announcing the possibility of a rapprochement with OPEC, particularly Saudi Arabia. The Russians floated the idea of negotiating an agreement with OPEC to cut production. And even if nothing comes of it, the beleaguered Russian economy gets a short-term boost from the sudden jump in oil prices off their recent low.

In terms of global crude oil production, OPEC holds a market share of more than 40%, with Saudi Arabia, OPEC’s biggest producer, accounting for about 13% of the global market. Russia, which is one of the biggest non-OPEC producers, holds a market share of around 13% as well.

But Russia has made similar overtures during past oil crashes, and then failed to cut production even after OPEC finally acquiesced. So there’s not a lot of trust to go around.

Meanwhile, Russia and Saudi Arabia, the nation that wields the most power in the oil-producing cartel, are both on opposite sides of the conflict in Syria, making it even more unlikely that the two countries would reach an accord.

Even so, the mere notion of possible production cuts has been enough to trigger a 20% rebound in the price of WTI, to $31.72 per barrel as of Thursday’s close.

Exchange rates don’t generally move with the same magnitude as volatile commodities prices, but the loonie’s ascent since its January low, at US$0.6859, has been equally noteworthy. It recently traded at US$0.7273, helped even further by a sudden decline in the U.S. dollar, owing to diminished expectations for further rate hikes this year by the U.S. Federal Reserve.

Still Under Pressure

But it’s probably too soon to relax. The energy markets are likely to remain volatile, which will put pressure on the loonie again.

Meanwhile, the Bank of Canada is widely expected to cut its benchmark overnight rate by another quarter-point later this year, possibly as soon as late May. The central bank cut rates twice last year, and the overnight rate now stands at 0.50%. Another rate cut would also put pressure on the Canadian dollar.

So while we’re likely near a long-term bottom for the looney, we probably haven’t seen it quite just yet.

Indeed, a Reuters poll of 45 currency strategists shows that the currency is expected to head toward US$0.70 again in the months ahead. And given the market’s penchant for drama, it could very well dip even lower than that.

As one of RBC’s leading currency strategists told the wire service, “Everything is taking cues from crude prices, and nothing more strongly so than the Canadian dollar.”

Among those surveyed, the most bearish forecast was US$0.645, which is below the recent low, but not quite as bad as Macquarie’s prediction that the currency could sink to US$0.59.

Two Ways to Play a Lower Loonie

For those new to Canada’s investment story and who have a three- to five-year time horizon, these considerations may seem academic.

After all, it’s exceedingly difficult to call the bottom in any asset, and if we’re just 5% to 10% away from the loonie’s ultimate low, then now may be as good a time as any to start building a position in dividend-paying Canadian stocks.

And for income investors who like the possibility of a growth kicker, the lower exchange rate could create some nice windfall opportunities as U.S. companies look to acquire Canadian firms on the cheap.

The latest example of this trend happened earlier this week when U.S.-based Lowes scooped up Canadian home-improvement retailer Rona for US$2.3 billion, which is equivalent to C$3.2 billion.

So there are two ways for U.S. investors to play a low loonie, and they’re not mutually exclusive: Lock in long-term value at a nearly 30% discount to the U.S. dollar, while selecting the sort of fundamentally superior firms that might be attractive to foreign acquirers.

The Dividend Champions: Portfolio Update

By Deon Vernooy

“Steady as she goes” was again the mantra coming from BCE Inc. (TSX: BCE, NYSE: BCE), whose investors saw a 5.7% rise in earnings per share for 2015 along with a 5.3% increase in the dividend.

Operating results for the final quarter of 2015 were in line with expectations, with earnings per share unchanged from the previous year. Operating revenue increased by 1.4%, while adjusted EBITDA increased by 3% compared to the previous year.

The wireless division again delivered strong results, with a 6.8% rise in EBITDA. Wireless customers increased by 1.6%, and average revenue per user jumped 4.4% compared to the previous year. Mobile users, who require ever more data to play games, watch videos and use Internet services, are the major driver of growing profits in this division.

The wireline business increased EBITDA by 1.5% in the final quarter, with Fibe TV and Internet services growing strongly, while the deteriorating trend in landline connections continued unabated.

BCE also announced financial targets for 2016, with mid-single digit growth targets for adjusted earnings per share and free cash flow per share. The dividend, which targets a payout of 65% to 76% of free cash flow, was set at C$2.73 per share, indicating a 5% increase is on deck for 2016.

BCE is one of our largest holdings in the Dividend Champions Portfolio. With abundant cash flows, a solid balance sheet, and a forward dividend yield of almost 5%, we are comfortable holders of the stock.

The quarterly and full-year results of WestJet Airlines (TSX: WJA, NYSE: WJAVF) were not well received by investors, leading to an 11% drop in the share price on the day of the announcement.

Earnings per share for the final quarter of 2015 declined by 27%. At the same time, the quarterly dividend of C$0.14 per share was 17% higher than the previous year.

Sharply lower fuel costs and an increase in passenger numbers could not counter increased price competition as a result of more industry capacity, higher depreciation, rising maintenance costs, and an increase in the effective corporate tax rate.

The full year delivered record profits and a 19% increase in earnings per share. The full-year dividend was also increased by 17%. Capacity expanded by 5.2% during the year, and passenger traffic grew by 3.3%, resulting in a slight decline in the load factor.

Management’s outlook for 2016 includes a further increase in capacity by 7% to 10%. The bulk of this growth is attributable to the new 767s that are flying to Hawaii this winter and London in the summer. Management is very confident in the strength of the Canada-U.K. market and expects these operations to be immediately accretive to earnings in 2016.

As a result of weak business travel in Western Canada, first-quarter revenue per seat mile is expected to decline from the very strong first quarter of 2015, pointing to a further decline in profit for the first quarter. Consensus estimates now indicate a 25% decline in first-quarter earnings per share and a 15% decline for the full year.

The balance sheet remains in good shape, and operating cash flow is sound, both of which indicate that the dividend should be safe even in a lower profit environment.

The immediate outlook for the business may be challenged, but we believe the long-term outlook for this outstanding operator is sound. After the sharp decline in the share price, the dividend yield is now 3.4%, and we estimate the fair value at C$21.

Suncor Energy (TSX: SU, NYSE: SU) weighed in with a C$2 billion loss for full-year 2015. This was mainly the result of unrealized foreign-exchange losses and impairments, both of which represent non-cash items.

Perhaps more importantly, Suncor produced cash flow from operations of $1.294 billion (C$0.90 per share, -13%) in the challenging fourth quarter. The company also declared a C$0.29 per share quarterly dividend. This was 4% higher than the same quarter last year.

Operating results were solid for the oil sands operation, with production increasing by 14% compared to a year ago, to 439,700 barrels per day. Meanwhile, operating costs declined by 19%, to C$28 per barrel. Overall oil production increased by 5% during the quarter, as Libya and Terra Nova respectively experienced production problems and natural declines.

The key question regarding the 2016 financial year is whether Suncor will be able to fund its capital expenditures and maintain the dividend in a lower-for-longer oil-price environment.

Given the revised guidance provided by the company, capital expenditures will be further reduced to C$6 billion to C$6.5 billion, with a similar amount estimated for 2017.

And 2018 will require much lower expenditures, as both the Fort Hill and Hebron developments will be completed in 2017.

Should oil prices remain at current levels, then there is little doubt that the company will have to increase its debt levels to be able to fund its capital requirements while maintaining the $1.7 billion annual dividend. Fortunately, the balance sheet is in a sound position, with a debt-to-capital ratio of 22%.

Suncor’s offer to acquire the publicly listed shares of Canadian Oil Sands closes on Feb. 6, and carries the support of the Oil Sands board. If concluded successfully, Suncor will inherit another C$300 million of capital expenditures and an additional $160 million of dividend payments to service shares issued to Canadian Oil Sands shareholders.

The dividend yield is now 3.7%, and we estimate Suncor’s fair value at C$36/US$26.

Brookfield Infrastructure (TSX: BIP-U; NYSE: BIP) announced fourth-quarter funds from operations (FFO) per unit were 3% higher than the previous year, while the distribution per unit was increased by 7.5%.

For the full year, FFO per unit rose by 4%, and the distribution per unit was raised by 10%. The payout ratio (defined as distribution as a proportion of FFO) increased to 68%, which remains within the firm’s target range of 60% to 70%.

The utilities, transport, communications infrastructure, and energy units have performed reasonably well, with positive year-over-year changes in FFO.

Although the partnership’s balance sheet carries substantial debt, the company indicates that it has liquidity of almost US$3 billion available.

The company provided an update on their strategic initiatives, with the A$12 billion acquisition of Asciano, the Australian rail and ports operator, their main focus. The initial bid encountered some problems when the Australian Competition Commission expressed reservations in its initial review, which left the door open for a competing bid. Brookfield now expects the transaction to play out over the next few weeks and months.

The dividend yield on the stock is now just over 6%, which we consider attractive for a high-quality operation. We estimate Brookfield Infrastructure’s fair value at C$59/US$43, which is considerably higher than the current share price.

However, we will remain cautious with new purchases until we see how the Asciano transaction plays out.