By exploring Ryan Crowther's "discounted cash flow analysis" strategy, John Heinzl, of the Globe and Mail, maps out five potential stocks for you to consider for future growth.

You might call it Ryan Crowther's investing world according to GARP.

No, it's not a new John Irving novel. GARP, in this case, stands for growth at a reasonable price, and it's the principle that guides the stock-selection strategy of Mr. Crowther and his colleagues at Franklin Bissett Investment Management in Calgary.

"We are definitely looking for growth as part of the equation, so it's not strictly a dividend mandate,” says the co-lead manager of the Franklin Bissett Canadian Dividend Fund. “We're approaching our valuation and the market in general through a long-term lens. We're not fixating...on where things are going today or next quarter.”

As for the reasonable price part of GARP, Mr. Crowther and his team focus on discounted cash flow analysis. In basic terms, it involves projecting all of the future cash flows of a company and then discounting them back to a present value—that is, determining what the cash would be worth in today's dollars. This is what's known as the stock's intrinsic value, and if the shares are trading below this number, it can indicate that the stock is cheap.

Patience is another key ingredient in the GARP style. “If we're going into a name, we're ready to wear that for a long time. We're not transient shareholders,” he says.

The methodology has produced some impressive results. For the five years ended September 20, the fund returned an annualized 8.5%, compared with 4.8% for the S&P/TSX Composite Total Return Index, according to Morningstar. Here's a sample of the stocks the fund currently holds.

Enbridge (ENB)

Dividend yield: 2.9%

Pipeline giant Enbridge has raised its dividend at a 13.6% annual clip over the past five years, and the next five years should bring more double-digit increases, Mr. Crowther says. Despite its strong growth prospects, the stock has been weak of late—it's off about 10% from its 52-week high of $49.17 in May. “I definitely wouldn't call it a cheap stock, but it's not expensive either,” he says.


Dividend yield: 4.4%

The fund holds all of the big banks, and it added to its positions earlier this year. “They've got good valuations and good dividend yields across the board,” Mr. Crowther says. Plus, the banks' diversified lines of business—retail banking, wholesale banking, and wealth management—will help them manage through a rough patch, such as a slowdown in mortgage lending. “Among the group, [CIBC] trades at the most attractive valuation,” he says.

Potash Corp. (POT)

Dividend yield: 4.4%

Potash Corp. may seem like an unusual pick, given the negative sentiment swirling around the company since the July breakup of the Russian-Belarussian potash cartel BPC. But Mr. Crowther believes Potash Corp.'s dividend is safe and the company has a bright future, despite the short-term upheaval in the potash marketplace. “We think there's a demand growth story there with potash that will play out over a long time frame,” he says. “You'd have to see potash prices come down significantly before you'd really see the dividend at risk.”

Wajax (WJX)

Dividend yield: 6.3%

Wajax is another stock that's had a rough ride lately, but which should produce solid long-term returns, Mr. Crowther says. Hurt by the sluggish economy, the distributor of heavy equipment, industrial components, and power systems slashed its dividend by 26% in May, and this month it issued weaker-than-expected third-quarter guidance. “We're trying to look through that. We know what this business can do profit-wise when conditions are good,” he says. “We think it's an attractively valued stock at this point.”

Keyera (TSX:KEY)

Dividend yield: 4.1%

Keyera, which is involved in natural gas liquids gathering, processing, fractionation, storage, transportation, and marketing, has raised its dividend by nearly 7% annually over the past five years. And Mr. Crowther expects that both the dividend and share price will continue to grow. “They are very well situated, in terms of where their footprint is, to be able to service those basins that have experienced that fast-growing production,” he says. “We think that's a tailwind that's going to persist...for years to come.”

Disclosure: The author personally owns shares of Enbridge and CIBC.

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