Dividend All-Stars 2016

Three big banks got top marks this year. See all 18 all-star stocks

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by

From the November 2016 issue of the magazine.

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Top 100 Dividend Stocks

The All-Star Leaders

Three big banks got top marks last year and did so again this year. They are the Bank of Nova Scotia, the Bank of Montreal and TD Bank, which offer yields of 4.2%, 4.0% and 3.8%, respectively. They are joined by CIBC, which gained a grade level this year and provides a 4.7% yield.

All of the banks generate more income via their dividend yields than they offer on their “high interest” savings accounts, albeit with more risk. After all, recent revelations of lending practices in the nation’s real estate sector should be of concern to bank shareholders. It’s a big reason why wise investors diversify broadly.

Insurance firms Great-West Lifeco and Sun Life Financial made it to the top of the class again with yields of 4.4% and 3.9%, respectively. The same is true of Genworth MI Canada, which provides mortgage insurance and a hefty yield of 4.9%. Worries about the real estate market weigh on the stock, which trades at nine times earnings and 88% of book value. A housing crash would put it to the test.

Sort through and learn more about the A-grade stocks in the chart below.

The B Team

Just a step behind, the B-list starts with Royal Bank and National Bank with yields of 4.1% and 4.7%, respectively. They’re joined by insurance firms Industrial Alliance Insurance and Manulife Financial. Both are returning B-graders, as is asset manager IGM Financial, which offers the highest yield of the bunch at 6.2%.

Financial conglomerate Power Corp. of Canada rounds out the B-team’s list of financials. The firm slipped a grade this year, but still provides a hefty 4.8% yield and trades near book value. It also owns stakes in highly-rated Great-West Lifeco, IGM Financial, and Power Financial.

The B-list continues with auto-parts firms Linamar and Magna, which offer relatively modest yields, strong dividend growth and low price-to-earnings ratios of seven and eight, respectively. Keeping with the transportation theme, WestJet picked up a B and has delivered top-notch dividend growth over the last five years.

Electric utility Fortis and Shaw Communications round out the team. Fortis is a little expensive at 21 times earnings while Shaw is relatively cheap at just under 10 times earnings.

Sort through and learn more about the B-grade stocks in the chart below.

  • Name Name Ticker Industry Price (Sept 1, 2016) Price (Sept 1, 2016) Market Cap ($M) Dividend Yield Dividend Yield Dividend Growth (5Yr Avg) Price/ Earnings Dividends/ Earnings Debt/ Equity Price/ Cash Flow Price/ Book One-Year Total Return Five-Year Total Return Grade Grade
    Bank of Montreal Bank of Montreal BMO Banking $87.02 $87.02 $56,116 4.0% 4.0% 3.7% 12.89 51% 201% 9.96 1.50 32.1% 78.3% A A
    Bank of Nova Scotia Bank of Nova Scotia BNS Banking $70.08 $70.08 $84,434 4.2% 4.2% 7.1% 12.32 52% 221% 5.57 1.66 26.2% 59.3% A A
    CIBC CIBC CM Banking $104.12 $104.12 $41,118 4.7% 4.7% 6.0% 10.08 47% 103% 6.78 1.91 15.6% 72.4% A A
    Genworth MI Canada Genworth MI Canada MIC Insurance $33.99 $33.99 $3,122 4.9% 4.9% 10.1% 8.58 42% 12% 5.41 0.88 22.8% 104.3% A A
    Great-West Lifeco Great-West Lifeco GWO Insurance $31.44 $31.44 $31,216 4.4% 4.4% 2.1% 11.59 51% 22% 5.41 1.65 -1.0% 79.4% A A
    Sun Life Financial Sun Life Financial SLF Insurance $41.29 $41.29 $25,304 3.9% 3.9% 2.0% 12.40 49% 20% 5.43 1.36 5.2% 97.1% A A
    TD Bank TD Bank TD Banking $58.67 $58.67 $108,864 3.8% 3.8% 10.8% 13.21 50% 158% - 1.65 19.2% 79.5% A A
    Fortis Fortis FTS Utilities $41.54 $41.54 $11,817 3.6% 3.6% 5.5% 21.09 76% 119% 6.94 1.47 22.3% 53.6% B B
    IGM Financial IGM Financial IGM Asset Management $36.25 $36.25 $8,718 6.2% 6.2% 1.9% 12.37 77% 28% 14.13 1.96 8.8% 7.1% B B
    Industrial Alliance Insurance Industrial Alliance Insurance IAG Insurance $46.87 $46.87 $4,809 2.7% 2.7% 4.8% 13.51 37% 20% 6.93 1.25 20.1% 56.3% B B
    Linamar Linamar LNR Automotive $53.84 $53.84 $3,510 0.7% 0.7% 5.9% 7.22 5% 74% 4.52 1.47 -18.2% 276.5% B B
    Magna International Magna International MG Automotive $52.65 $52.65 $20,483 2.5% 2.5% 14.9% 7.62 19% 33% 6.14 1.64 -13.8% 223.2% B B
    Manulife Financial Manulife Financial MFC Insurance $17.86 $17.86 $35,236 4.1% 4.1% 6.9% 14.17 59% 76% 2.98 0.92 -8.6% 61.4% B B
    National Bank of Canada National Bank of Canada NA Banking $46.57 $46.57 $15,726 4.7% 4.7% 10.2% 13.38 63% 310% 1.47 1.64 15.8% 58.7% B B
    Power Corp of Canada Power Corp of Canada POW Insurance $27.68 $27.68 $12,822 4.8% 4.8% 1.8% 11.31 55% 23% 2.08 1.05 3.1% 46.0% B B
    Royal Bank of Canada Royal Bank of Canada RY Banking $81.46 $81.46 $120,975 4.1% 4.1% 9.4% 11.84 48% 250% 5.51 1.93 19.1% 103.0% B B
    Shaw Communications Shaw Communications SJR.B Media $26.38 $26.38 $12,943 4.5% 4.5% 5.7% 9.56 43% 90% 7.64 2.14 6.4% 52.0% B B
    WestJet Airlines WestJet Airlines WJA Passenger Transportation $24.45 $24.45 $2,931 2.3% 2.3% 30.1% 10.45 24% 102% 3.75 1.49 6.6% 90.9% B B
       

A Caveat

Use our grades as the starting point for your own research. Before buying any stock, make sure its situation hasn’t changed in an important way and that it’s right for your portfolio. Read the firm’s latest press releases and regulatory filings. Scan the news to make sure you’re aware of important developments.

Look beyond the grades and think about the unique or intangible features of each company. Such factors can be beneficial, like a recent technological development. But they can also be detrimental, like the sudden arrival of new competition. Similarly, we’re in an aging bull market, which means that you should be prepared for storm clouds on the horizon.

While we’re pleased with our long-term track record, we can’t guarantee that you’ll make a fortune with every A- or B-rated stock. The market is just too wild and woolly for that. Nonetheless, we do think they deserve your attention and further research.

Norm Rothery, CFA, PhD, is the founder of StingyInvestor.com and tweets as @NormanRothery. He may hold some of the securities mentioned in this article.

3 comments on “Dividend All-Stars 2016

  1. I get tremendous value from every article written by Norm Rothery. Thank you.

    Reply

  2. In addition to the great dividends, I especially like those companies that offer dividend reinvestment plans. I’ve searched on the internet and whatever I find is dated. Do you know of any sources for Canadian companies that offer DRIPS? Thanks

    Reply

    • I read all of Norm Rothery’s articles he is very good.
      Try Money Saver a good magazine and offered in both PrinT and online

      Reply

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