The entrance for National Bank on the corner of York St. and Adelaide St. West in Toronto's Financial district.Charla Jones/The Globe and Mail
National Bank Financial has released its dividend all-star list for 2016, comprised of 33 stocks.
They made the selections based on the following criteria: the security must have a yield of approximately 4 per cent or higher; the dividend is expected to be sustainable and the security's price is anticipate to appreciate.
Among the recommendations, a stock with great expectations in 2016 is High Arctic Energy Services (HWO-T).
Analyst Gary Colman sees the dividend not only as sustainable but with room to grow. The annual dividend is 20 cents per share, and Mr. Colman believes this could rise to 28 cents in 2016, with the payout ratio remaining conservative at 32 per cent. The analyst also highlights the company's healthy balance sheet, with High Arctic expected to have a net cash balance of approximately $28-million at the end of 2015, as well as the company's valuation, with the stock trading at a discount relative to its peers. The analyst's target price is $5.50, suggesting over 70-per-cent potential upside in the share price.
Another stock with a high expected return is Student Transportation Inc. (STB-T). Mr. Colman has a target price of $7.75, implying a potential price return of 58 per cent. The declining oil price is a positive for the company, potentially increasing earnings before interest, taxes, depreciation, and amortization (EBITDA) by between 1.5 per cent and 2 per cent. The analyst believes there is room for multiple expansion with the stock currently trading relatively in-line with its historical average. The company's balance sheet is anticipated to improve with its debt ratio declining.
Savaria Corporation (SIS-T) is a micro-cap stock that just made it onto the list with its yield at 3.9 per cent. The analyst has a target price of $6.50, forecasting a potential price return of 27 per cent. The analyst, Leon Aghazarian, notes the company's strong balance sheet with $27.5-million of cash, sustainable dividend, and low valuation. He believes the stock's valuation is compelling with it trading at an enterprise value-to-EBITDA multiple at the low end of its historical range.
The complete list is provided below along with the analysts' target prices and the respective yields.
Jennifer Dowty