When we think of the dividend aristocrats, we usually think of the select group of US stocks that has been increasing its dividend payout consecutively for at least 25 years. While the past doesn’t guarantee the future, it is still a good indication of businesses with good balance sheets and sound financials. Don’t worry, Canadians also have their aristocrats… they are just not that impressive!
What is an Aristocrat?
In order to be part of this elite group, a company must be in a good position to increase both their sales and earnings year after year on a very consistent basis. If one fails to do so, it will quickly become impossible to raise its dividend. Canadians also have their dividend aristocrats, but the criteria used for selection is fairly different.
Canadian Aristocrat Requirements
In order to be considered an S&P Canadian Dividend Aristocrat, the company must have increased its dividend payout every year for five years but have a free pass and is still eligible if the company maintains the same dividend payout for a maximum of 2 years. Therefore, we are looking at stocks that have a good potential for raising its dividend yet still pretty far off 25 consecutive years.
Here’s a Complete List of Canadian Aristocrats Rules:
- The company’s security is a common stock or income trust listed on the Toronto Stock Exchange and a constituent of the S&P Canada BMI.
- The security has increased ordinary cash dividends every year for five years, but can maintain the same dividend for a maximum of two consecutive years within that five year period.
- The float-adjusted market capitalization of the security, at the time of the review, must be at least C$ 300 million.
- For index additions, the company must have increased dividend in the first year of the prior five years of review for dividend growth. This rule does not apply for current index constituents.
Where Can You Find The Canadian Aristocrats List?
If you do a simple search on the internet you will probably find it quickly, but just to save you some time; here it is.
Open Dividend Aristocrats List
|Symbol||Name||Market Cap||DVD Yield||P/E||Payout||EPS Basic||Rev||DVD Growth|
|AGF.B.TO||AGF Management Limited||0.7$B||13.03||12.73||160.81||-29.25||-7.76||9.06|
|BNS.TO||Bank of Nova Scotia||79.2$B||4.06||11.51||47.25||11.33||10.62||5.49|
|BDT.TO||Bird Construction Inc||0.5$B||6.49||17.11||111.13||-28||5.08||9.26|
|BYD.UN.TO||Boyd Group Income Fund||0.8$B||1.03||#N/A||-63.37||#N/A||22.49||17.91|
|CNR.TO||Canadian National Railway Co||63.1$B||1.29||21.63||26.88||9.37||4.51||13.33|
|CNQ.TO||Canadian Natural Resources Ltd||40$B||2.46||12.81||26.88||-14.72||2.1||23.3|
|CP.TO||Canadian Pacific Railway Ltd||37.5$B||0.64||34.79||22.13||4.87||4.46||7.18|
|REF.UN.TO||Canadian Real Estate Investment Trust||3.2$B||3.77||37.48||99.41||1.88||4.81||3.59|
|CTC.A.TO||Canadian Tire Corp||9.7$B||1.62||16.52||23.33||8.48||5.26||11.43|
|CU.TO||Canadian Utilities Ltd||10.3$B||2.74||16||32.22||4.91||4||7.84|
|CWB.TO||Canadian Western Bank||2.6$B||2.59||12.02||32.13||12.93||14.09||12.13|
|CCL.B.TO||CCL Industries Inc||3.9$B||0.98||22.57||18.34||15.57||9.71||8.96|
|CCA.TO||Cogeco Cable Inc||3.4$B||1.73||16.32||27.93||#N/A||9.85||20.11|
|CMG.TO||Computer Modelling Group Ltd||0.9$B||3.38||33.23||105.45||8.06||11.14||23.41|
|CSU.TO||Constellation Software Inc||6.9$B||1.41||60.71||79.19||43.1||28.88||84.68|
|CJR.B.TO||Corus Entertainment Inc||2$B||4.72||13.04||48.01||38.99||1.1||14.17|
|DII.B.TO||Dorel Industries Inc||1.3$B||3.34||17.09||53.59||-12.46||1.62||18.43|
|EMP.A.TO||Empire Co Ltd||8$B||1.25||33.04||40.59||-6.13||7||8.24|
|ENF.TO||Enbridge Income Fund Holdings Inc||2.1$B||3.71||24.33||#N/A||19.73||#N/A||5.89|
|ESL.TO||Enghouse Systems Ltd||1.1$B||0.95||38.09||29.88||31.95||27.68||23.73|
|ESI.TO||Ensign Energy Services Inc||1.7$B||4.4||13.07||55.85||-12.94||4.23||6.12|
|ET.TO||Evertz Technologies Ltd||1.3$B||4.17||18.44||218.62||-8.97||0.6||14.87|
|EIF.TO||Exchange Income Corp||0.5$B||7.4||42.77||314.83||-5.25||45.56||2.22|
|FTT.TO||Finning International Inc||4.3$B||2.85||14.17||37.37||28.67||2.43||6.8|
|MIC.TO||Genworth MI Canada, Inc.||3.5$B||4.23||9.2||34.69||5.03||1.91||N/A|
|GS.TO||Gluskin Sheff & Associates Inc||0.9$B||3.26||7.71||70.56||37.59||29.09||17.23|
|HLF.TO||High Liner Foods Inc||0.7$B||1.88||19.28||33.06||25.59||12.98||26.22|
|HCG.TO||Home Capital Group Inc||3.2$B||1.75||11.2||#N/A||18.78||16.53||16.65|
|IGM.TO||IGM Financial Inc||11.6$B||4.91||14.47||68.02||1.82||0.16||1.46|
|IMO.TO||Imperial Oil Ltd||43.4$B||1.02||10.44||10.38||-5.3||0.84||5.22|
|IFC.TO||Intact Financial Corp||10.8$B||2.34||15.78||39.33||24.18||12.12||7.26|
|PJC.A.TO||Jean Coutu Group PJC Inc||5.3$B||1.44||23.7||73.01||#N/A||2.9||16.27|
|LB.TO||Laurentian Bank of Canada||1.4$B||4.2||10.98||43.32||1.25||5.34||8.66|
|MDI.TO||Major Drilling Group International Inc||0.5$B||3.55||#N/A||-28.68||#N/A||-7.46||8.45|
|NPR.UN.TO||Northern Property Real Estate Investment Trust||0.8$B||6.63||8.79||57.96||24.59||6.46||0.89|
|PSI.TO||Pason Systems Inc||1.9$B||3||21.27||52.63||-17.31||6.62||19.23|
|RBA.TO||Ritchie Bros Auctioneers Inc||3.2$B||2.15||30.55||58.6||-2.31||5.04||7.59|
|RCI.B.TO||Rogers Communications Inc||23.2$B||4.06||17.42||67.3||15.45||2.31||11.71|
|SJR.B.TO||Shaw Communications Inc||14.2$B||3.57||16.68||41.07||8.04||9.1||5.32|
|SU.TO||Suncor Energy Inc||52.4$B||3.1||17.45||45.19||2.84||7.07||29.56|
|TRI.TO||Thomson Reuters Corp||37.3$B||3.2||80.63||#N/A||-37.89||1.04||-0.63|
|THI.TO||Tim Hortons Inc||13.1$B||0||#N/A||41.07||12.72||9.76||26.62|
My Top 5 Canadian Dividend Aristocrats
The complete list includes 65 stocks. This is enough to build 2 different portfolios! The aristocrats’ list is a good place to start, but there are still lots of work to do before picking the right stocks. Following my 7 investing principles, I’ve highlighted my top 5. The list is in no particular order and some of them are the safest Canadian dividend stocks.
Intact Financial (IFC.TO) (Intact Stock Trend)
Intact Financial Corporation provides property and casualty insurance in British Columbia, Alberta, Ontario, Quebec and Nova Scotia. It distributes insurance under the Intact Insurance brand through a network of brokers and its subsidiary, BrokerLink.
IFC is now working on a stronger distribution platform and plans to expand in Brazil to diversify its business outside Canada. We expect IFC to keep its growth rate in the double digits for both revenues and EPS. This should give more room for additional dividend increases. The demand remains strong in Canada for insurance products and IFC has a well establish business model. Since Mother Nature should not be as rough as it was last year with Alberta’s flood, we should see bigger profits in 2015 for IFC.
We don’t see any major clouds over the head of IFC at the moment. The market for insurance is robust and IFC continuously posts stronger results than its peers. Only a big natural disaster could hurt IFC in 2015.
Telus offers residential phone, internet, TV and mobile phone services. Back in 2008, Telus also bought Emergis, a leading electronic healthcare solutions provider and then created Telus Health Solutions. Considering the number of wireless subscribers, Telus is the 3rd largest provider in Canada. Interesting enough, T gets 49% of its revenue from Wireline and 51% from Wireless.
Telus continues to outperform its peers and the stock market year after year. The best part is that T is doing this while continuing to increase its dividend year after year. It went from $0.24/share in 2009 to $0.40/share in 2014. There is still a lot of room in Ontario and Quebec for this company to raise its profit in the upcoming years. Telus TV services are also growing very fast, stealing clients from Shaw at the same time. It currently shows 800,000 customers and 75% of its mobile subscribers are on a smartphone. Therefore, it means higher bill per customer for Telus.
Telus has to deal with a continuous flow of massive investment to keep up with its other competitors. It is true that Telus is currently stealing customers from Shaw but the client acquisition cost is very high (some promotions included laptops giveaways). Also, mobile subscribers only grew by 1.3% in 2013, the slowest pace in the firm’s history.
Emera is an energy and service company. Emera’s main market is Nova Scotia as it owns Nova Scotia Power, the province’s main electricity provider. Emera actually owns power plants and distributes natural gas in Canada, the USA and the Caribbean. It is actively developing more energy projects in Eastern Canada.
Emera is pretty much alone in its main market which provides a very good income flow year after year. As long as EMA is using this cash flow to generate more projects, we should see consistent sales growth. Notably, 2 projects (a participation in Maritime Link and an undersea power cable) should be under operation for 2017. The future looks bright for EMA as it shows several projects for the next decade. Both revenues and EPS are growing steady over the past five years and the dividend has grown accordingly. EMA is definitely a strong utility to hold.
Considering the weaker Canadian economy outlook for 2015, EMA growth might not be spectacular in 2015. We see this stock as a defensive play to benefit from a relatively high dividend if the economy is not doing so well. If we are wrong, EMA will simply continue to grow higher. It’s a win-win for this pick for 2015!
Gluskin Sheff & Associates Inc provides discretionary investment management services to high net worth private clients and institutional investors in Canada and abroad.
The company evolves in a highly profitable market and has become appealing to other big players looking for a takeover target. I also like the fact that private clients tend to be more loyal than the average. In 2014, GS made an acquisition (Blair Franklin) instead of being bought out by a bigger player. I still think it can happen in the future. In the meantime, private wealth management is where the money is for any of the financials. Many analysts see this stock over $30. We are definitely in a good time to add this growth stock.
After the acquisition of Blair Franklin, there was a net redemption of 1% of their AUM which was unexpected. It obviously reduced this acquisition profitability over the long term. If markets slowdown, the interest from investors to add money to their portfolio will follow in the same trend, leading to less profit for a company such as GS.
Finning International Inc is the Caterpillar equipment dealer, which sells, rents and provides parts and service for equipment and engines to customers in various industries.
FTT is directly linked to Caterpillar (CAT) as the dealer in Canada. While analysts downgraded the stock to “hold” due to the current slow environment for mining exploration, FTT is showing strong fundamentals. The dividend paid has increased significantly and is perfectly in line with the EPS as the payout ratio hasn’t moved since mid-2011. The company is appealing for a long term play. Right now, it pays 3% dividend and trades at a P/E ratio of 13. You might have to be patient in 2015, but this is a company to hold for the upcoming years.
The fact that FTT depends mainly on the mining and construction industry might hurt the stock in 2015. Over a few years, it is a very interesting play but I’m expecting FTT not to contribute too much to my 2015 portfolio performance. However, in 3-4 years, you will be happy to have selected such a promising dividend stock.
How did I pick these 5 companies? (+ I have 4 more on my personal list!)
Throughout my ten years of experience in the market, I’ve built my own investing model described by the following 7 investing principles:
Principle #1: High Dividend Yield Doesn’t Equal High Returns
Principle #2: If There is One Metric; It’s Called Dividend Growth
Principle #3: A Dividend Payment Today is Good, A Dividend Guaranteed For the Next 10 Years is Better
Principle #4: The Foundation of Dividend Growth Stocks Lies in its Business Model
Principle #5: Buy When You Have Money in Hand
Principle #6: If You Know Why You Bought, You Will Know Why You Sell
Principle #7: Think Core, Think Growth
If you are interested in reading more about my investing philosophy; I discuss each principle and provide academic research confirming my investing process in the following article: The 7 Investing Principles I Follow to Succeed.
Using these principles, I didn’t make a top 5 but a top 9 Dividend Aristocrats but this list is available to Dividend Stocks Rock members only:
Read about my 7 Investing principles and confirm that my investment philosophy works with yours. Who knows, we may work together in the future?
This is a guest post by Mike, aka The Dividend Guy Blog.
Related: 2 Overlooked Dividend Aristocrats
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