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All Contents © 2019The Kiplinger Washington Editors
By Will Ashworth
| October 1, 2018
Novice income investors often look for the highest-yielding dividend stocks, thinking more is more. What they fail to realize is that’s a much riskier proposition than finding companies with more reasonable current yields that consistently grow their payouts over time.
In the U.S., the most hallowed group of dividend raisers are the Dividend Aristocrats – a group of 53 stocks that have improved their annual payout every year for at least 25 consecutive years. But America isn’t the only part of the world with Aristocrats – Europe has them, and so does our neighbor to the north. In fact, there are 78 Canadian Dividend Aristocrats.
Qualification for aristocracy in Canada is a little different and less stringent. A member stock must be listed on the Toronto Stock Exchange and a member of the S&P Canada BMI (Broad Market Index), it must increase its annual payout for five consecutive years (it can maintain the same dividend for two consecutive years) and have a float-adjusted market cap of at least C$300 million.
We’ve trimmed the list down to 25 Canadian dividend stocks better suited for American investors. The following 25 Canadian Dividend Aristocrats are easier to buy, as they’re listed on either the NYSE or Nasdaq, and we’ve raised the bar to a seven-year minimum of consecutive payout hikes. Here they are:
Data is as of Sept. 28, 2018. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Dollar figures are in U.S. dollars unless otherwise indicated; the exchange rate as of Oct. 1, 2018, is 1.28 Canadian dollars for every U.S. dollar. Analysts’ opinions provided by The Wall Street Journal.
Market value: $4.9 billion
Dividend yield: 5.0%
Consecutive annual dividend increases: 8
Analysts’ opinion: 10 buy, 2 hold
Algonquin Power & Utilities (AQN, $10.36) is a Canadian utility company with 70 power generation facilities in the U.S. and Canada, serving more than 764,000 customers in three provinces and 13 states, including Illinois, Pennsylvania, Michigan and Minnesota.
The company’s Liberty Power unit currently has more than $2 billion in capital investments to make through 2022, including $400 million under construction, $330 million in development, and additional wind projects and international expansion outside North America.
Algonquin last raised its quarterly dividend by 10% with its July payment of 12.82 cents per share.
Market value: $73.3 billion
Dividend yield: 4.4%
Analysts’ opinion: 7 buy, 1 overweight, 5 hold, 0 underweight, 1 sell
Bank of Nova Scotia (BNS, $58.78) is one of Canada’s five big banks, serving more than 24 million customers in North America, Latin America, the Caribbean, Central America and Asia-Pacific.
BNS has gone on a buying binge over the past 10 months, spending almost C$7 billion on acquisitions both in Canada and Latin America. However, the deals have yet to have a positive effect on the bank’s stock, which is down over the past 52 weeks relative to its Canadian peers.
Bank of Nova Scotia’s third-quarter earnings were buoyed by strong results in its Canadian and Asian operations, however. That prompted the bank to raise its quarterly dividend by 3.7% to 85 Canadian cents per share – its sixth hike in just three years.
Market value: $36.7 billion
Dividend yield: 5.7%
Consecutive annual dividend increases: 10
Analysts’ opinion: 8 buy, 0 overweight, 11 hold, 0 underweight, 1 sell
BCE (BCE, $40.52) is Canada’s largest communications company with annual revenue of $22.7 billion. It generates approximately 54% of its sales from wireline broadband and TV, 35% from wireless, and the remaining 11% from the company’s media operations.
The company’s fiber network is 240,000 kilometers in length – the largest in Canada – delivering internet, phone and TV to more than 9.2 million locations across seven provinces.
BCE has raised its annual dividend by 5% or more for 11 consecutive years, keeping its payout ratio within a range of 65%-75%.
Market value: $11.1 billion
Distribution yield: 4.7%*
Consecutive annual dividend increases: 9
Analysts’ opinion: 9 buy, 1 overweight, 1 hold, 0 underweight, 0 sell
Brookfield Infrastructure Partners LP (BIP, $39.88), as the name implies, invests in infrastructure assets in all parts of the world.
BIP recently announced that it is buying Enercare (CSUWF) – a company that rents water heaters and HVAC systems to 1.6 million residential and commercial customers in Canada – for C$4.3 billion including the assumption of debt.
Enercare established a special committee of its board in March to explore strategic alternatives, including a sale. Brookfield is paying a 64% premium to Enercare’s share price before the special committee was formed.
Brookfield Infrastructure Partners is a spinoff of its parent, Brookfield Asset Management (BAM), which still owns 30% of its shares. It last raised its quarterly distribution by 8.1% as of the March 2018 payment.
*Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.
Market value: $9.5 billion
Analysts’ opinion: 3 buy, 0 overweight, 6 hold, 0 underweight, 2 sell
Brookfield Renewable Partners LP (BEP, $30.24) operates one of the world’s largest publicly traded renewable energy companies with 17,400 megawatts of capacity and 876 power-generating facilities around the world. Hydroelectric power accounts for three-quarters of its total revenue.
If you’re looking for a diversified but still pure-play renewable energy business, Brookfield Renewable is it. Its power assets are located in 15 different countries and valued at more than $43 billion.
Brookfield buys assets below intrinsic value, makes them better (resulting in higher cash flows), then turns around and sells them when asset values are at a premium.
BEP looks to deliver long-term total returns of 12%-15% annually, and the distribution is slowly becoming a bigger part of that each year. Since 2012, it has grown its distribution by 6% compounded annually.
Market value: $5.5 billion
Dividend yield: 1.5%
Consecutive annual dividend increases: 11
Analysts’ opinion: 6 buy, 0 overweight, 5 hold, 0 underweight, 0 sell
If you happen to own an airline (doesn’t everyone?) and are looking to get your pilots some flight simulation training, they’re likely to train in a CAE (CAE, $20.32) flight simulator.
The company operates three business segments: Civil Aviation Training Solutions, Defence and Security, and Healthcare. However, the aviation segment drives its business, generating 60% of its overall revenue. During the first quarter ended June 30, 2018, CAE signed training solutions contracts worth C$499 million while selling 18 full-flight simulators. It has a total order backlog of C$8 billion.
CAE’s latest dividend hike, in August, was an 11% boost to 10 Canadian cents per share.
Market value: $42.1 billion
Dividend yield: 4.5%
Analysts’ opinion: 5 buy, 1 overweight, 6 hold, 1 underweight, 1 sell
Canadian Imperial Bank of Commerce (CM, $93.77) is the smallest of Canada’s five big banks. It greatly expanded its U.S. business in 2017 buying Chicago-based PrivateBancorp for $5 billion in cash and shares. As a result of its purchase of PrivateBancorp, the bank’s third-quarter earnings from its U.S. business increased by 295% to C$162 million.
On Sept. 13, CIBC sold $769 million of Canada’s first gender-diversity bond, the funds used to lend to companies advancing women in the executive ranks and the boardroom. Paying 72 basis points more than similar-maturity Canadian federal government bonds, investors can expect to see more of this from CIBC and other banks.
CIBC most recently raised its quarterly dividend by 3 cents to C$1.36 a share.
Market value: $67.0 billion
Dividend yield: 1.5%
Consecutive annual dividend increases: 22
Analysts’ opinion: 11 buy, 3 overweight, 17 hold, 0 underweight, 1 sell
Canadian National Railway (CNI, $89.80) was once run by Hunter Harrison, the executive Bill Ackman hired to turnaround its rival, Canadian Pacific Railway (CP).
CN is North America’s second largest publicly traded North American railway with a network of almost 20,000 route miles serving more than $250 billion of goods annually across Canada and the American Midwest.
Over the past six years, Canadian National has grown revenues and operating profits by 6% and 9%, respectively, compounded annually. Investors will like the fact that the railroad operator has grown its annual dividend payment every year since it went public in 1995, averaging 16% a year.
Market value: $40.6 billion
Dividend yield: 3.1%
Consecutive annual dividend increases: 17
Analysts’ opinion: 22 buy, 1 overweight, 5 hold, 1 underweight, 0 sell
Canadian Natural Resources (CNQ, $32.66) is one of the world’s top independent energy producers, with natural gas, heavy crude oil and oil sands operations in North America and offshore operations in Africa and the U.K. It produces the oil equivalent of 1.1 billion barrels daily.
Business is so good for Canadian Natural Resources it’s been able to pay down its long-term debt by C$2.5 billion over the past 12 months. Its debt is now 2.1 times adjusted EBITDA, down from 3.4x.
In addition to debt reduction, the company has returned C$1.2 billion via share buybacks and dividends through the first six months of 2018. It currently pays a quarterly dividend of 33.5 Canadian cents, which is 22% higher than its year-ago payout.
Market value: $3.3 billion
Dividend yield: 3.3%
Analysts’ opinion: 2 buy, 0 overweight, 13 hold, 0 underweight, 0 sell
When investors think of Domtar (UFS, $51.73), one generally envisions pulp and paper. However, 19% of the company’s revenue comes from the sale of adult and baby diapers under the Attends brand. Its adult incontinence products are expected to see annual sales growth of 4% to 6% over the long-term.
In 2017, Domtar generated $5.1 billion in sales with 68% in the U.S.; Europe accounted for another 12%, Canada 9%, and 11% for the rest of the world. On the paper side of the business, approximately 46% of the company’s overall sales come from newsprint, by far its biggest operating segment.
Domtar generates consistent cash flow — $453 million in 2015, $465 million in 2016, and $449 million in 2017 — returning between 25% to 33% of it to shareholders annually.
Market value: $57.0 billion
Dividend yield: 6.4%
Consecutive annual dividend increases: 22
Analysts’ opinion: 11 buy, 1 overweight, 7 hold, 0 underweight, 0 sell
One of the big headwinds holding back Enbridge (ENB, $32.29) stock was a complex business structure in place to take advantage of tax loopholes available to master limited partnerships.
However, when the Federal Energy Regulatory Commission decided to put an end to the loopholes, which allowed MLPs to double their recovery of taxes, Enbridge decided to buy back all of its pipeline subsidiaries at the cost of C$11.4 billion.
Enbridge did cut its annual dividend-growth-rate forecast to a manageable 10% despite oil prices in the $70s. But this can be taken as a positive – Enbridge, under a unified corporate structure, and amid higher oil prices but less strain from a rapidly scaling dividend, should produce better cash flow and ultimately be more attractive to investors.
Market value: $13.8 billion
Dividend yield: 4.0%
Consecutive annual dividend increases: 44
Analysts’ opinion: 9 buy, 1 overweight, 4 hold, 0 underweight, 0 sell
Fortis (FTS, $32.42) owns 10 utility operations in Canada, U.S. and the Caribbean, providing gas and electricity to more than 3.3 million customers. It is one of the top 15 utilities in North America. In the company’s 31-year history, its asset base has grown from $300 million at its launch in 1985 to $50 billion today.
The company gets 92% of its earnings from regulated utilities, which means those profits are fairly stable and benefit from steady rate increases. It’s easy to see why Fortis has been able to increase its annual dividend for 44 straight years.
Over the past decade, Fortis has kept its dividend payout ratio between 61% and 73%, ensuring it’s not stretching to make its payments.
Market value: $11.7 billion
Analysts’ opinion: 6 buy, 1 overweight, 9 hold, 0 underweight, 0 sell
Franco-Nevada (FNV, $62.55) is different from most mining companies in that it doesn’t own any mines. Instead, it finances mine developments for other companies in return for a portion of future revenue. As a royalty play, the harder it is for mining companies to get traditional financing for a project, the better the opportunity for Franco-Nevada.
In recent years, the royalty company has diversified into oil and gas revenue streams; oil and gas now account for 14% of its revenue. Overall, Franco-Nevada generates 81% of its revenue from the Americas, with just 19% from the rest of the world. So there are geographic expansion opportunities outside North and South America.
Since Franco-Nevada went public in 2007, it has paid out more than $1 billion in dividends and increased its annual payout every year.
Market value: $6.4 billion
Consecutive annual dividend increases: 7
Analysts’ opinion: 5 buy, 0 overweight, 12 hold, 0 underweight, 0 sell
Gildan Activewear (GIL, $30.43) is based in Montreal, Canada, but you wouldn’t know it based on where it generates most of its revenue. In the most recent second-quarter, Gildan sold just 4% of its overall revenue ($764 million) in Canada, with 84% of its sales in the U.S. and the remaining 12% elsewhere.
Gildan is best known as a maker of T-shirts, printed and unprinted. That part of the business continues to experience strong sales growth. The hosiery part of its business, which includes socks and underwear, isn’t growing. Exclude that, and Gildan’s business is very healthy.
Gildan has increased its annual dividend by a robust 20% or more for five consecutive years.
Market value: $2.0 billion
Dividend yield: 4.9%
Consecutive annual dividend increases: 7
Analysts’ opinion: 1 buy, 0 overweight, 6 hold, 0 underweight, 0 sell
Granite Real Estate Investment Trust (GRP.U, $42.92) owns and manages 85 industrial, warehouse and logistics real estate properties covering 33 million square feet of space valued at $3.1 billion.
Granite is a very diversified real estate investment trust (REIT), with 33% of its revenue in the U.S., 18% in Canada, and 49% in Europe. The type of property it owns is very balanced, too, with 37% of its rental revenue from logistics, 36% from special-purpose real estate, and 27% from multi-purpose real estate with the average lease six years.
Its dividend payout generally ranges between 65% to 80% of its funds from operations (FFO, an important measure of REIT profitability). Since 2011, Granite has returned $840 million to shareholders in the form of distributions and share buybacks.
Market value: $18.8 billion
Dividend yield: 2.5%
Analysts’ opinion: 10 buy, 2 overweight, 3 hold, 0 underweight, 3 sell
It’s not easy being an auto parts manufacturer, but if any company can handle the tariff issues, it’s Magna International (MGA, $52.53).
A big player in electric vehicle development, Magna just joined with BMW and Andretti Motorsport as a partner in their electric-vehicle racing team. The alliance allows Magna to learn more about how its mobility solutions business can help cities solve their mobility challenges.
In the second quarter, Magna announced that it would engineer and build electric cars in China by entering into a joint venture with the Beijing Electric Vehicle Company. The facility in China will be able to produce 180,000 vehicles a year.
Magna repurchased $729 million of its shares in Q2 2018 in addition to paying out $115 million in dividends.
Dividend yield: 1.7%
Analysts’ opinion: 5 buy, 1 overweight, 6 hold, 1 underweight, 1 sell
Methanex (MEOH, $79.10) is the world’s largest producer of methanol. Methanol is a clean-burning biodegradable fuel that’s gaining traction for both commercial and residential uses. It’s also used in combination with other chemicals to make plastics, paints, building materials, etc.
Although Methanex currently only produced 7.2 million tonnes of methanol in 2017, it can produce as much as 9.4 million tonnes annually, providing significant potential cash-flow growth.
Between its quarterly dividend (currently 33 cents per quarter) and share repurchases, Methanex has returned $1.1 billion to shareholders since 2013.
Courtesy Ritchie Bros. Auctioneers
Market value: $3.9 billion
Dividend yield: 2.0%
Consecutive annual dividend increases: 15
Analysts’ opinion: 2 buy, 1 overweight, 8 hold, 1 underweight, 2 sell
Ritchie Bros. Auctioneers (RBA, $36.13) helps individuals and businesses sell heavy equipment using more than 40 permanent auction sites in approximately 15 countries as well as through IronPlanet, its online marketplace that brings buyers and sellers together.
In 2017, Ritchie Bros. sold $4.5 billion of other people’s goods, getting a piece of the action on every transaction. However, it doesn’t just bring the buyer and seller together. It also adds value by providing shipping, insurance, financing, warranties and other services vital to the auction experience.
Since 1980, Ritchie Bros. has grown its annual gross transactional value from $86 million to $4.5 billion, a compound annual growth rate of 11.3%.
In the company’s most recent quarter, it announced a 6% increase in its quarterly dividend payment to 18 cents per share.
Market value: $116.6 billion
Dividend yield: 3.8%
Analysts’ opinion: 6 buy, 1 overweight, 6 hold, 0 underweight, 2 sell
Royal Bank of Canada (RY, $80.19) is arguably Canada’s biggest bank if you go by metrics other than earnings; for instance, its 13 million customer count is tops in Canada.
RBC also has the largest full-service wealth advisory business in Canada, along with the largest fund company in Canada. Even better, J.D. Power has named it the highest for customer satisfaction the last three years.
Over the past 10 years, Royal Bank of Canada paid out more than C$35 billion in dividends to its shareholders, growing its payment by an average of 12% a year – three times greater than the average U.S. bank.
Courtesy Suncor Energy
Market value: $64.3 billion
Dividend yield: 2.9%
Consecutive annual dividend increases: 16
Analysts’ opinion: 18 buy, 2 overweight, 8 hold, 0 underweight, 1 sell
There may not be a NYSE-listed Canadian company that’s more popular with analysts at the moment than Suncor Energy (SU, $38.69).
Suncor is best known for its oil sands projects in Northern Alberta. Its latest, Fort Hills, which boasts lower carbon emissions and operating costs, just opened to pomp and circumstance as the Canadian oil industry celebrates higher prices and a stronger economy.
Suncor, which spent more than C$17 billion on Fort Hills, expects the site to produce almost 200,000 barrels of oil a day, more than some OPEC nations.
Over the past six years, Suncor has grown its dividend by 19% annually, from 50 Canadian cents per share in 2012 to C$1.44 in 2018.
Market value: $21.8 billion
Dividend yield: 4.3%
Consecutive annual dividend increases: 14
Analysts’ opinion: 12 buy, 0 overweight, 8 hold, 0 underweight, 0 sell
Telus (TU, $36.84) is a Canadian telecom company with C$13.3 billion in annual revenue, derived from 13.1 million subscribers — 8.9 million wireless, 1.7 million high-speed internet, 1.3 million phone and 1.1 million TV. In 2017, it grew its wireless, internet and TV subscribers by 3.8%, 5.3% and 3.7% respectively.
Telus established a goal in 2017 that will see it grow its annual dividend payment by 7% to 10% annually over the next few years while meeting its long-term payout guideline of 65% to 75% of earnings.
Market value: $31.8 billion
Dividend yield: 3.0%
Consecutive annual dividend increases: 24
Analysts’ opinion: 7 buy, 0 overweight, 5 hold, 0 underweight, 1 sell
Thomson Reuters (TRI, $45.68) started October by closing the biggest leveraged M&A deal of 2018. A group of investors led by Blackstone Group (BX) bought 55% of Thomson Reuters’ Financial & Risk business for $17 billion.
Thomson Reuters shareholders will see $9 billion to $11 billion of the proceeds in the form of share repurchases, with the rest going to debt repayment, cash to the balance sheet, and taxes and deal expenses.
Its largest shareholder, the Thomson family’s Woodbridge Group, will reinvest approximately 30%-50% of its future dividends in Thomson Reuters stock over the next three years.
As a result of the deal, which will leave Thomson less reliant on the financial services industry, Thomson Reuters will keep its annual dividend at $1.38, bringing its streak of 24 annual dividend increases to an end. However, Thomson Reuters can remain a Canadian Dividend Aristocrat by increasing the payout next year.
Courtesy Mike Mozart via Flickr
Market value: $111.6 billion
Dividend yield: 3.4%
Analysts’ opinion: 10 buy, 0 overweight, 4 hold, 0 underweight, 1 sell
Toronto-Dominion Bank (TD, $60.80) is arguably Canada’s most successful big bank if earnings have anything to do with it.
TD’s third-quarter earnings grew 12.3% to C$3.1 billion thanks to 27% year-over-year growth from its U.S. retail banking business, which has 26,804 employees servicing more than 9 million customers. TD operates in 15 states and Washington, D.C., and now is one of the top 10 retail banks in the U.S.
TD has increased its annual dividend by 11% a year, from 33 Canadian cents in 1998 to C$2.68 in 2018.
Market value: $37.4 billion
Dividend yield: 5.2%
Consecutive annual dividend increases: 18
Analysts’ opinion: 15 buy, 1 overweight, 3 hold, 0 underweight, 0 sell
TransCanada (TRP, $40.46) owns one of the largest natural gas pipeline networks (57,100 miles of pipeline) in North America, capable of moving 25% of the continent’s demand for natural gas. In addition, its Keystone liquids pipeline transports approximately 20% of Western Canada’s crude oil exports.
The U.S. Keystone XL pipeline got the green light from President Donald Trump in 2016. Several Native American tribes are still fighting it. Once built, it’s expected to carry more than 830,000 barrels of oil daily from Canada down to Nebraska.
In 2018, TransCanada increased its dividend by 10% to C$2.76 on an annualized basis. The company intends to grow the dividend by 8% to 10% annually through at least 2021.
Market value: $21.0 billion
Dividend yield: 0.7%
Consecutive annual dividend increases: 8
Analysts’ opinion: 6 buy, 0 overweight, 2 hold, 0 underweight, 0 sell
Waste Connections (WCN, $79.77) is a waste services company providing garbage and recycling collection for secondary markets in the U.S. and Canada.
Over the past five years, Waste Connections has grown its adjusted free cash flow from $300 million to close to $900 million, allowing for double-digit increases of its dividend.
Waste Connections stock has a 10-year cumulative return of 422% as of Aug. 31, considerably higher than its peers and the Standard & Poor’s 500-stock index. WCN also has delivered 14 consecutive years of positive shareholder returns.