The state of Canadian dividend stocks

Collectively they’ve fared poorly over the last 12 months



Online only.


I’m hard at work on this year’s MoneySense Retirement 100. But before it’s published next month I’d like to share a few observations about the general state of Canadian dividend stocks.

There are about 330 dividend payers on the TSX and the largest 100 by market capitalization get into the Retirement 100.

Royal Bank is the largest dividend stock in the land with a market capitalization of about $100 billion. Barrick is about 10 times smaller and trades near $10 billion. It’s the 38th largest dividend payer. DHX Media is at $1 billion and is in 151st place. Strad Energy Services, with a market capitalization near $100 million, is number 292. Overall, there are only a few large dividend stocks in Canada and many smaller ones.

Dividend stocks have, collectively, fared poorly over the last 12 months with average total returns of -8.3%.

But a few big outliers can skew the average. For instance, if 99 stocks had returns of 0% and 1 stock had a return of 1,000% then the average return of the group would be 10%.

That’s why I also like to consider medians, which represent the middle point of a ordered set of data.

For instance, three stocks have returns of 8%, 4%, and 18%. The median return of the group of 3 is 8%, which is the middle reading when the returns are arranged in ascending—or descending—order. The average return of the group is (8%+4%+18%)/3, which equals 10%.

When it comes to Canadian dividend stocks on the TSX, the average return over the last 12 months is -8.3% and the median return is -7.7%. While there is a difference between the two, it isn’t huge.

However, the difference can grow when dealing with ratios. For instance, the average price-to-book-value ratio (P/B) for Canadian dividend stocks is 2.3 and the median is 1.6. Similarly, the average price-to-earnings ratio (P/E) is 34.3 and the median is 18.0. In these cases, the averages are skewed by a few stocks that have very low book values, or earnings, and thus have very high ratios.

There is another subtlety you should be aware of. In my calculations I exclude stocks with negative ratios. While there are very few stocks with negative book values, there are a large number of companies with negative earnings. Indeed, only 77% of dividend payers are profitable and only 75% earn enough to cover their dividends.

More positively, yields are relatively high. The average yield provided by Canadian dividend stocks is 4.3% and the median yield is 3.7%. That’s more than the paltry yields offered by bank accounts these days, but dividend stocks do come with a side order of risk.

I look forward to sharing this year’s Retirement 100 with you online starting Oct 7, 2015.

Safer Canadian Dogs

Investors following the Dogs of the Dow strategy want to buy the 10 highest yielding stocks in the Dow Jones Industrial Average (DJIA), hold them for a year, and then move into the new list of top yielders.

The Dogs of the TSX works the same way but swaps the DJIA for the S&P/TSX 60, which contains 60 of the largest stocks in Canada.

My safer variant of the Dogs of the TSX tracks the 10 stocks in the index with the highest dividend yields provided they also pass a series of safety tests, such as having positive earnings. The idea is to weed out companies that might cut their dividends in the near term. Just be warned, it’s a task that’s easier said than done.

Here’s the updated Safer Dogs of the TSX, representing the top yielders as of September 10. The list is a good starting point for those who want to put some money to work this week. Just keep in mind, the idea is to hold the stocks for at least a year after purchase—barring some calamity.

Name Price P/B P/E Earnings Yield Dividend Yield
Potash Corp (POT) $33.51 2.47 15.63 6.40% 6.00%
National Bank of Canada (NA) $43.25 1.57 9.57 10.45% 4.81%
BCE (BCE) $54.13 3.81 18.41 5.43% 4.80%
Bank of Nova Scotia (BNS) $58.69 1.46 10.97 9.12% 4.77%
CIBC (CM) $93.99 1.88 10.51 9.51% 4.77%
TransCanada (TRP) $43.68 1.85 17.9 5.59% 4.76%
Bank of Montreal (BMO) $69.38 1.25 10.94 9.14% 4.73%
Shaw (SJR.B) $26.31 2.54 16.24 6.16% 4.50%
Power Corp (POW) $27.75 1.06 7.58 13.19% 4.49%
Rogers (RCI.B) $43.96 4.14 18.17 5.51% 4.37%


Source: Bloomberg, Sept. 10, 2015

Price: Closing price per share

P/B: Price to Book Value Ratio

P/E: Price to Earnings Ratio

Earnings Yield: Earnings divided by Price, expressed as a percentage

Dividend Yield: Expected-Annual-Dividend divided by Price, expressed as a percentage

As always, do your due diligence before buying any stock, including those featured here. Make sure its situation hasn’t changed in some important way, read the latest press releases and regulatory filings and take special care with stocks that trade infrequently. Remember, stocks can be risky. So, be careful out there. (Norm may own shares of some, or all, of the stocks mentioned here.)

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One comment on “The state of Canadian dividend stocks

  1. Thanks Norm! I closely follow your Dogs of the TSX (well, at least 5 cos. of the 10…) For those who track the Dogs of the Dow, this should help: (currently being updated too)


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