Earlier today, in his first speech of the year, Bank of Canada (BoC) Governor Stephen Poloz underscored his continuing dovishness toward future rate hikes with a somewhat downbeat assessment of global growth prospects.

In his remarks before the Halifax Chamber of Commerce, Mr. Poloz noted that despite the fact that a recovery has been underway since 2009, economic growth still pales in comparison to the years prior to the Great Recession. In a similar manner, global growth has been occurring at a pace that’s just two-thirds of what prevailed during the several-year period leading up to the downturn.

Despite the gloomy tone, the implications of his remarks are positive from a policymaking standpoint, as they signal the BoC is in no hurry to raise rates, a move that could choke off the country’s sluggish growth.

The timing of this speech was important, as it came in the wake of the Reserve Bank of New Zealand’s (RBNZ) decision to raise its short-term cash rate to 2.75 percent, up 25 basis points from its all-time low. This was the RBNZ’s first rate hike since July 2010, and it’s one of the first developed-world central banks to embark upon a tightening cycle since the Global Financial Crisis.

Though tiny New Zealand is on the other side of the globe, it’s considered one of Canada’s developed-world peers, part of the so-called commodity bloc. And given Canada’s recent uptick in inflation along with stronger-than-expected economic data, Mr. Poloz needed to quell any speculation that the BoC might follow the RBNZ’s lead.

Although the economies of both Canada and New Zealand are forecast to expand over the next two years, New Zealand’s growth trajectory is much stronger than Canada’s. While Canada’s gross domestic product (GDP) is expected to grow by 2.3 percent and 2.6 percent in 2014 and 2015, respectively, New Zealand’s economy is projected to grow by 3.0 percent and 3.5 percent, respectively, for those years.

In other words, Canada needs more of a push, not just from internal policymaking, but also from a US rebound that finally seems to be gaining traction. A rate hike at this juncture would jeopardize the BoC’s hopes for the export sector to take over from debt-burdened consumers as the primary driver of the country’s economy.

Fortunately, it seems like traders got the message. Following the speech, the Canadian dollar tumbled slightly more than 1 percent from the day’s high and is fast approaching the loonie’s four-year low, near USD0.891, which the currency hit in late January. The loonie currently trades near USD0.898, down about 15.3 percent from this cycle’s high in mid-2011.

Beyond signaling the BoC’s rate bias, Mr. Poloz offered additional analysis as to why boosting growth has proved so difficult. First, he acknowledged both the extraordinary nature of the downturn, the recovery from which the BoC has previously said was more akin to a period of post-war reconstruction than the usual rebound that follows a recession. He also noted that the several years of growth that preceded the downturn were similarly extraordinary, and that therefore it may not make sense to extrapolate the heady growth rates from that era into our expectations for future growth.

Mr. Poloz then turned to the underlying factors that drive an economy: productivity and the labor force. The good news is that the country’s productivity growth over the next two years is expected to outpace its average over the past 30 years.

The bad news is that demographics may pose a considerable long-term challenge for sustaining a robust labor force, particularly as the baby-boom generation retires, and consequently the country’s work force shrinks. Additionally, the bank also foresees problems arising from how baby boomers, which constitute the single largest cohort of Canada’s population, store their wealth. Naturally, because interest rates are at historic lows, a considerable portion of boomer wealth has been invested in real estate.

While housing is an important sector of the economy, Mr. Poloz, like other economists, believes that when assets are tied up in real estate, they’re not being put to their most productive end and are therefore holding back economic growth.

Although demographics is destiny, as the saying goes, Mr. Poloz believes that trend could still be offset by countries working together to remove impediments to growth, such as by removing trade barriers.

Just last week, we wrote about how Canada’s government is already aggressively pushing toward that end, with its hard-won free-trade agreement with South Korea an important step toward diversifying the country’s export markets.

Portfolio Update

Alberta-based energy exploration and production company Crescent Point Energy Corp (TSX: CPG, NYSE: CPG) pursues an integrated business strategy acquiring, exploiting and developing high-quality, long-life light and medium oil and natural gas properties.

The CAD16 billion company delivered a solid fourth quarter with both strong organic production and reserve growth. Indeed, record production helped the firm surpass its earlier guidance for a year-end exit rate of 124,000 barrels of oil equivalent per day (boe/d) in November.

Fourth-quarter production of 127,641 boe/d, up 18 percent year over year, was well ahead of analyst expectations of 122,800 boe/d. Management attributes these results to a successful drilling program spurred by advancements in technology, as well as the company’s consistent push to improve its completion techniques, the latter of which is an industry term that refers to the process of making a well ready for production.

As one example of the strides the company has made toward greater cost efficiency, drilling, completion and equipping costs for its Saskatchewan operations dropped by approximately 25 percent during 2013.

Funds flow from operations came in at CAD533 million, or CAD1.35 per share, up 14 percent year over year, exceeding forecasts of CAD1.21 per share. Higher commodity prices increased the firm’s netback to CAD50.67 per boe/d, which helped drive growth in operational cash flow. Netback is an industry term referring to the net profit per unit of energy produced, and it allows for comparisons against performance in prior periods as well as peers.

During the quarter, Crescent Point’s capital expenditures totaled CAD485.5 million, including CAD389.4 million spent on drilling and development activities, with 205 wells drilled at a 99 percent success rate.

During 2013, Crescent Point added 93.6 million barrels of oil equivalent (mmboe) to its proved and provable reserves at a low cost of CAD20.09 per boe. Total proved plus provable reserves are now 586.3 mmboe on a net basis.

For 2014, management has set a capital-development budget of CAD1.75 billion, up slightly from the CAD1.72 billion the firm spent in 2013. These investments are projected to boost average daily production to 126,500 boe/d, with a year-end exit rate of 135,000 boe/d, consistent with the company’s earlier guidance in December.

Management also raised its guidance for full-year 2014 funds flow from operations to CAD2.25 billion from CAD2.1 billion, thanks to higher commodity prices and a lower exchange rate, with funds flow per share at CAD5.59 versus the earlier projection of CAD5.24

On Bay Street, Crescent Point enjoys strong sentiment, with 22 “buys,” one “hold,” and one “sell.” The consensus 12-month target price is CAD47.24, which suggests potential appreciation of 17.1 percent above the current share price.

For full-year 2014, analysts forecast cash flow per share will rise 6 percent, to CAD5.48, an improvement of 2.6 percent since Crescent Point reported earnings. Sales are projected to climb 9 percent, to CAD3.49 billion.

Crescent Point’s payout ratio, which management bases on funds flow from operations, was 52 percent for the quarter, down 7 percentage points from a year ago. The monthly payout has stood at CAD0.23 since June 2008, and the stock currently yields 6.8 percent.

Over the period since we added the stock to our Portfolio in September 2011, the shares have climbed as high as CAD46.93 in early 2012, but currently trade about 13.7 percent below that high. On a total-return basis, the company has lagged its sector peers on the S&P/TSX Composite Index by 10.4 percentage points during the period in which we’ve held the stock.

That kind of volatility is inherent to investing in the resource sector, but Crescent Point’s high yield enables us to be patient as the company’s growth story continues to unfold. Crescent Point Energy is a buy up to USD48 in the Aggressive Portfolio.