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

Handoffs can be just as important to economic growth as they are to Olympic relay races. And that appears to have been the case in Canada, as stronger-than-expected fourth-quarter growth helped the economy further accelerate during the initial leg of the first quarter.

On its face, fourth-quarter gross domestic product (GDP) growth might not have seemed much to get excited about. But economists had expected GDP to flat-line during the final quarter. Instead, it grew at an annualized pace of 0.8%, blowing away the consensus forecast.

This week, the January numbers were finally released, and Statistics Canada revealed that GDP grew 0.6% month over month, a pace nearly double what economists had predicted.

The sudden boom has economists furiously adjusting their models, with some now forecasting that first-quarter growth could come in at 2.5% to 3.0% annualized. That’s significant because 2.5% is the minimum threshold at which the Bank of Canada says the country’s economy is operating at full capacity.

And economists were uncharacteristically ebullient in their description of January’s growth, employing verbiage such as “whopping,” “rip-roaring” and “flying start.”

The economy’s performance during January was underpinned by growth in the manufacturing, retail, and resource sectors. And with the exception of wholesale trade, which declined by 0.2% during the month, all the other major contributors to GDP saw gains.

Manufacturing got a big lift from exports, which have benefitted from a lower Canadian dollar. The sector’s output has grown for three consecutive months and is now up 2.6% year over year.

Although oil prices plumbed a new low during January, that didn’t stop Canada’s oil sands producers from pumping more. Non-conventional extraction helped boost the energy sector’s output by 1.4% in January, for the fourth consecutive month of growth.

Meanwhile, the Canadian economy continues to enjoy significant support from the country’s consumers, despite their record-high debt burden (or perhaps because of it). Retail trade climbed 1.4% month over month, for growth of 4.3% over the trailing year, making retail among the strongest sectors of the economy.

And as we reported last week, the newly elected Liberal government delivered on its campaign pledge to include stimulus spending in its first budget.

The first phase of the country’s stimulus package came in at C$11.9 billion, an amount that some observers have criticized as too modest. In some respects, even Canada’s Liberals are fiscal conservatives, at least compared to their more profligate peers in the U.S.

The government hopes that fiscal stimulus will boost GDP growth by half a point this year, which would be a significant gain, especially when considering that the forecast for full-year growth is just 1.4%. But check back in a month, and the consensus estimate may be decidedly rosier (those economic models take time to tweak).

Though it remains to be seen whether this trend will continue, economists believe the acceleration in growth won’t be a fluke this time around, in part because unlike past blow-outs there were no special factors behind January’s strong, broad-based performance. More please.

Our Super-Secret Stock Pick

In May, we’re holding our annual Wealth Summit–this year in Las Vegas. It’s a great way for us to meet you, our subscribers, one-on-one, and there are still spaces open if you’re interested.

Also this year, we’ll be making a special recommendation to those who attend the Summit, and to those who are part of our Wealth Society, whose members receive all the Investing Daily newsletters and other premium services.

It’s a fun exercise for us because there are no rules. We don’t have to pick a Canadian stock. In fact, our pick doesn’t even need to be a stock: It could be an alternative investment that isn’t traded on a public market.

Our publisher says we can’t reveal the pick in Canadian Edge, or even to him before the Summit. But in the weeks ahead, we’ll let you in on some of the research we’re doing to identify this exclusive pick.

The Dividend Champions: Portfolio Update

By Deon Vernooy

InnVest REIT (TSX: INN-U, OTC: IVRVF) has made steady progress toward improving its financial performance, while enhancing its hotel portfolio, as evidenced by solid results for full-year 2015. However, the final quarter was marred by poor performance in the Alberta portion of the portfolio.

For the full year, funds from operations (FFO is net income adjusted for depreciation and gains or losses from property sales) per unit rose 4.2%. Further adjusted for maintenance capital expenditures, the increase was a more substantial 10.9%. The monthly distribution was maintained at C$0.40 per unit on an annualized basis.

During the fourth quarter, FFO per unit declined 18% due to declining rates and occupancy at hotels in Alberta.

Also of note, InnVest’s number of public units outstanding increased 29% following new issuances in late 2014 and 2015 to finance acquisitions and the repurchase of convertible debentures.

Apart from Alberta, where lower energy prices are depressing economic activity, the business environment for hotel operations in other parts of Canada remains positive, with solid growth reported industry-wide in 2015 and further growth expected in 2016. The weak currency is also supporting tourism, as overnight visits from the U.S. increased by 8% in the first 11 months of 2015, while bookings by all international visitors rose 7%.

Management continues to enhance the portfolio with substantial renovations, the acquisition of high-quality assets in key locations, and the sale of non-core hotels. Since the start of 2014, 23 hotels have been sold, with gross proceeds of C$31 million, while five hotels in key city areas have been acquired. The company has earmarked another 10 non-core hotels for sale this year.

Over the past three years, InnVest has also renovated a substantial number of hotels, including 58 Comfort Inns. In 2015 alone, the REIT spent almost C$50 million on renovations, including projects at the Fairmont Palisser in Calgary and the Fairmont Royal York in Toronto. Operating results from renovated properties continue to demonstrate significant returns on capital expenditures.

The balance sheet improved somewhat during the year, with debt to gross asset value now down to 58% from 62% a year ago. The debt service coverage ratio also improved to 1.9 times, while the weighted average term to maturity of debt was extended to 4.7 years, and the average interest lowered to 5.0%.

The dividend payout ratio also improved during the year, to a more comfortable level of 81% of adjusted FFO. We do not expect dividend growth for the foreseeable future, but the current yield is an attractive 7.7%.

Although fourth-quarter results were disappointing, we believe management is taking the correct actions to enhance the quality of the overall portfolio and improve the balance sheet. We remain holders of the units in the Dividend Champions Portfolio and estimate the fair value at C$6.00, or US$4.55 per unit.