Dividend All-Stars 2018 - MoneySense

Dividend All-Stars 2018

Canada’s biggest banks and insurance are always strong dividend plays, but a few energy producers also find their way into our top picks. Check out our complete list of Dividend All-Stars


The All-Star leaders

The following three banks got As last year and they did so again this year. The Bank of Montreal (BMO) offers a yield of 4.0% and trades at 1.5 times book value. CIBC (CM) provides a 5.0% yield and trades at only 10 times earnings. Last, but not least, TD Bank (TD) pays a 3.6% yield and sports the strongest momentum of the three with a one-year return of 17.5%.

All of the banks generate more income for investors via their dividend yields than they offer on their “high interest” savings accounts. But dividend income isn’t as safe as a savings account and there are storm clouds on the horizon. For instance, the move by the Bank of Canada to boost interest rates, along with a flagging real estate market, may weigh on the banks.

Insurance firms Great-West Life (GWO) and Sun Life Financial (SLF) also made it to the top of the class again with yields of 4.3% and 3.7%, respectively. Sun Life sports the best performance over the last year and five years for the A-graded stocks with total returns of 19.2% and 146.5%, respectively.

Financial conglomerate Power Corporation of Canada (POW) and its subsidiary Power Financial (PWF) round out the A-Team. They provide yields of 4.7% and 4.9%, respectively. Both trade at low earnings and book value multiples. They also own stakes in Great-West Life and IGM Financial.

The MoneySense A-Team

★ ★ ★ ★ ★
Bank of Montreal (BMO)
Great-West Life (GWO)
Power (POW)
Power Financial (PWF)
Sun Life Financial (SLF)
TD Bank (TD)
★ ★ ★ ★ ★

* View the full table to see all of the underlying data

Solid prospects

Just a step behind, the B-list starts with the Bank of Nova Scotia (BNS) and National Bank (NA), which both happen to yield 4.1% and to trade at 12 times earnings.

They’re joined by insurance firms Genworth MI Canada (MIC), Industrial Alliance Insurance (IAG), and Manulife Canada (MFC). Manulife is the largest of the bunch. It offers a yield of 3.4% and is the best one-year momentum candidate of the B-graded stocks with a total return of 39.2% over the last 12 months. Industrial Alliance Insurance pays a 2.7% yield and trades at only 10 times earnings. Genworth MI Canada is in the mortgage insurance business. As a result, it could be squeezed should the real estate market tumble. But it offers a yield of 4.9% and trades at just 7 times earnings and 0.9 times book value.

E-L Financial (ELF) is an insurance-focused conglomerate that owns Empire Life. While the firm pays a relatively paltry yield of 0.6%, it trades at a sharp discount to its net asset value and at just 5 times earnings.

Asset manager CI Financial (CIX) pays a 5.2% yield, which is the highest of the All-Stars. But it is under pressure from a bevy of low-cost competitors.

The list continues with auto-parts firms Linamar (LNR) and Magna (MG), which offer relatively modest yields, strong dividend growth, and low price-to-earnings ratios of 8 and 9, respectively. Magna pays its dividend in U.S. dollars.

Electric utility Fortis (FTS) just made the grade. It pays a 3.5% yield but its stock is a little on the expensive side at 20 times earnings.

The large media company Thomson Reuters (TRI) pays a 3.0% yield and the payments are in U.S. dollars.

The B-team wraps up with four oil and gas firms, which is a little unusual. ARC Resources (ARX), Imperial Oil (IMO), Suncor Energy (SU), and Whitecap Resources (WCP) all got the nod.  ARC offers the highest yield at 3.6%, followed by Suncor at 3.2%, and Whitecap at 3.1%.  Imperial Oil pays the least at 1.7% but its shares trade at only 12 times earnings.

The MoneySense B-Team

★ ★ ★ ★
ARC Resources (ARX)
Bank of Nova Scotia (BNS)
CI Financial (CIX)
E-L Financial (ELF)
Fortis (FTS)
Genworth MI Canada (MIC)
Imperial Oil (IMO)
Industrial Alliance Insurance (IAG)

Linamar (LNR)
Magna International (MG)
Manulife Financial (MFC)
National Bank (NA)
Suncor Energy (SU)
Thomson Reuters (TRI)
Whitecap Resources (WCP)
★ ★ ★ ★

* View the full table to see all of the underlying data

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

Illustration by Sam Irland