Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high net worth clients. michael@wickhaminvestments.com
What are we looking for?
Today’s screen looks at Canadian companies that are expected to grow their dividends, and their earnings per share, over the next 12 months.
The screen
My colleague Rob Belanger and I isolated companies that have a minimum market capitalization of $250-million.
We want companies that have had positive earnings per share (EPS) growth over the previous 12 months and are expected to continue that growth over the next year, according to analysts’ consensus estimates. EPS is an indication of a company’s profitability.
The projected yield over the upcoming year is the analysts’ forecasted dividends divided by the current stock price. These companies are sorted based on the percentage increase of that projected yield.
No discussion of dividends would be complete without showing the current payout ratio. This is the amount of earnings paid out as dividends. The lower the ratio, the more secure the dividend.
We have also included the price-earnings ratio. Generally, higher P/E ratios signify higher expectations.
What did we find?
Convenience store operator Couche-Tard shows the highest EPS growth over the next 12 months and has the lowest payout ratio.
The company with the highest expected percentage dividend increase over the next 12 months, according to analysts’ consensus, is fertilizer giant Agrium.
While you might expect the banks to lead in the projected yield over the next 12 months, freight transportation company Contrans Group bumped Royal Bank of Canada and Bank of Nova Scotia in that category.
Mortgage lender Home Capital shows up very well on this screen. The dividend increase is forecasted at 29.7 per cent and the payout ratio is only 15.3 per cent. It has the lowest P/E of all the companies.
Conclusion
Studies have shown that companies that increase their dividends outperform companies that don’t. Investors should be focusing on profitable companies with forecasted dividend increases and low payout ratios.
Companies expected to have higher dividend yields over the next 12 months
| Company | Symbol |
Market Cap ($-mil) |
Curr Yield (%) |
|---|---|---|---|
| Agrium Inc. | AGU-T | 15,303.12 | 0.98 |
| Home Capital Group | HCG-T | 1,987.75 | 1.53 |
| Linamar Corp. | LNR-T | 1,623.93 | 1.24 |
| Mediagrif Interactive | MDF-T | 297.08 | 1.81 |
| Enghouse Systems | ESL-T | 485.79 | 1.27 |
| Magna Int'l | MG-T | 12,206.25 | 2.06 |
| Aliment. Couche-B | ATD.B-T | 9,578.04 | 0.59 |
| Suncor Energy | SU-T | 47,881.28 | 1.56 |
| Royal Bank | RY-T | 91,073.02 | 3.53 |
| Telus Corp. | T-T | 22,130.65 | 3.50 |
Source: Bloomberg, Wickham Investment Counsel
| Company | Symbol |
Market Cap ($-mil) |
Curr Yield (%) |
Projected Yield Next 12 Mnths |
% Increase In Yield |
Payout Ratio (%) |
P/E |
EPS Growth Last 12 Mnths (%) |
Est. EPS Growth Next 12 Mnths (%) |
|---|---|---|---|---|---|---|---|---|---|
| Agrium Inc. | AGU-T | 15,303.12 | 0.98 | 2.14 | 117.73 | 21.36 | 10.72 | 14.15 | 16.44 |
| Home Capital Group | HCG-T | 1,987.75 | 1.53 | 1.98 | 29.69 | 15.28 | 9.19 | 17.24 | 34.89 |
| Linamar Corp. | LNR-T | 1,623.93 | 1.24 | 1.56 | 25.63 | 15.38 | 11.60 | 57.58 | 34.63 |
| Mediagrif Interactive | MDF-T | 297.08 | 1.81 | 2.26 | 24.56 | 37.18 | 20.52 | 242.86 | 37.97 |
| Enghouse Systems | ESL-T | 485.79 | 1.27 | 1.57 | 23.61 | 20.31 | 23.81 | 39.13 | 38.50 |
| Magna Int'l | MG-T | 12,206.25 | 2.06 | 2.53 | 22.82 | 15.90 | 9.48 | 290.70 | 14.16 |
| Aliment. Couche-B | ATD.B-T | 9,578.04 | 0.59 | 0.72 | 21.58 | 8.13 | 17.33 | 53.23 | 65.77 |
| Suncor Energy | SU-T | 47,881.28 | 1.56 | 1.85 | 18.92 | 12.84 | 10.13 | 23.17 | 6.63 |
| Royal Bank | RY-T | 91,073.02 | 3.53 | 4.02 | 13.74 | 47.53 | 13.3 | 18.87 | 20.38 |
| Telus Corp. | T-T | 22,130.65 | 3.50 | 3.93 | 12.18 | 71.69 | 17.58 | 17.11 | 15.55 |
| Contrans Group-A | CSS-T | 392.64 | 3.85 | 4.25 | 10.50 | 46.98 | 13.86 | 16.67 | 27.05 |
| Bank of Nova Scotia | BNS-T | 69,938.40 | 3.62 | 3.99 | 10.30 | 47.54 | 12.85 | 21.21 | 9.27 |
| Finning Int'l Inc. | FTT-T | 4,362.64 | 2.11 | 2.28 | 7.91 | 22.95 | 12.95 | 48.78 | 51.60 |
| CIBC | CM-T | 33,194.92 | 4.31 | 4.64 | 7.74 | 46.40 | 10.69 | 12.22 | 16.54 |
| Bank of Montreal | BMO-T | 40,282.08 | 4.44 | 4.77 | 7.44 | 45.39 | 9.43 | 41.96 | 11.81 |
| Power Financial | PWF-T | 20,337.09 | 4.75 | 4.97 | 4.72 | 53.91 | 12.29 | 58.54 | 6.08 |
Companies expected to have higher dividend yields over the next 12 months
- AGU-T
- HCG-T
- LNR-T
- MDF-T
- ESL-T
- MG-T
- ATD.B-T
- SU-T
- RY-T
- T-T
- CSS-T
- BNS-T
- FTT-T
- CM-T
- BMO-T
- PWF-T
