A big dividend bonanza - MoneySense

A big dividend bonanza

Norm Rothery expands his dog pack to capture safer Canadian stocks with even richer payouts


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The 10 Safer Canadian Dogs form a nice little portfolio of large high-yield stocks. But many income investors want more. That’s why I cast a wider net this week in an effort to catch a big dividend bonanza.


Safer Canadian Dogs

I wasn’t looking for small fry, which is why I started with companies listed on the TSX with revenues (over the last 12 months) in excess of $1 billion and market capitalizations (share price times shares outstanding) in excess of $1 billion. Both are measures of size with one focused on operations and the other on the market’s view of a firm’s worth.

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Next I threw back firms that didn’t earn enough over the last 12 months to cover the dividends they expect to pay over the next 12 months. Doing so removes a few turnaround candidates, which may—or may not—actually turnaround. The idea is to try to stick to safer stocks.

Finally, I looked for stocks with dividend yields in excess of 3% and below 6%. Here I’m looking for generous yields while avoiding stocks with extremely high yields (compared to their peers). The latter have a nasty tendency of cutting rather than growing their dividends.

You won’t be surprised to learn that the 10 Safer Dogs passed all of the tests. (You can find them listed in the following section.) But 17 other stocks also made the grade and they are displayed in the table below.

Combined, there are 27 stocks to choose from. Hopefully, you’ll find a few keepers!

Name Price P/B P/E Earnings Yield Dividend Yield
IGM Financial (IGM) $40.70 2.1 12.52 7.99% 5.53%
CI Financial (CIX) $27.95 4.26 14.41 6.94% 5.04%
Power Financial (PWF) $33.53 1.38 11.17 8.95% 4.92%
Northland Power (NPI) $23.23 5.65 19.36 5.17% 4.65%
Laurentian Bank (LB) $54.25 1.09 12.68 7.89% 4.57%
North West Co (NWC) $30.81 4.05 22.33 4.48% 4.15%
Great-West Lifeco (GWO) $35.37 1.77 13.41 7.46% 4.15%
Hydro One (H) $22.99 1.42 20.35 4.92% 3.83%
Royal Bank (RY) $94.96 2.1 12.92 7.74% 3.66%
TD Bank (TD) $65.83 1.73 12.98 7.70% 3.65%
ARC Resources (ARX) $16.85 1.66 21.6 4.63% 3.56%
Fortis (FTS) $45.42 1.39 22.25 4.49% 3.52%
Canadian Utilities (CU) $41.49 2.28 18.86 5.30% 3.45%
Manulife (MFC) $24.54 1.23 15.73 6.36% 3.34%
Canadian Western (CWB) $27.56 1.14 12.58 7.95% 3.34%
Element Fleet (EFN) $9.32 1.05 11.16 8.96% 3.22%
Transcontinental (TCL.A) $25.53 1.71 10.27 9.74% 3.13%

Source: Bloomberg as of July 5, 2017; See notes following the Safer Dogs table

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 June 8. 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
BCE (BCE) $58.55 3.54 17.8 5.62% 4.90%
Power (POW) $29.85 1.05 10.67 9.37% 4.80%
CIBC (CM) $106.15 1.73 8.83 11.32% 4.79%
TELUS (T) $44.68 3.25 20.69 4.83% 4.41%
Emera (EMA) $48.02 1.63 17.85 5.60% 4.35%
National Bank (NA) $54.90 1.83 11.53 8.67% 4.23%
Bank of Nova Scotia (BNS) $78.67 1.72 12.41 8.06% 3.86%
Agrium (AGU) $118.17 2.02 21.77 4.59% 3.83%
Bank of Montreal (BMO) $95.74 1.54 12 8.34% 3.76%
Sun Life Financial (SLF) $46.82 1.44 11.5 8.69% 3.72%

Source: Bloomberg as of July 5, 2017


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.)

Norm Rothery on common mistakes investors make