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Number Cruncher

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Number Cruncher

Mid-cap non-financials dividends that outperform Add to ...

What are we looking for?

The best mid-cap dividend stocks in the country.

More about today's screen

Today we continue with George Vasic's research on Canadian dividend growth stocks. For years, the UBS Securities Canada strategist has done a series of annual reports on the best dividend growth stocks in the country.

Yesterday we looked at his recent work on financial mid-cap dividend stocks that are part of the S&P/TSX completion index (these are members of the S&P/TSX composite that are not part of the S&P/TSX 60). Today, we look at mid-cap non-financials.

"The reason investors need to pay attention to the dividend growers outside the TSX 60 is that they have uniformly outperformed their large-cap peers within the 60, and with better reward/risk ratio," Mr. Vasic said in a recent report.

The mid-cap non-financials can be divided into two camps: consumer/industrials and telecom/utilities. Both groups have offered good dividend growth recently, as opposed to financials which have offered little to no dividend growth since the financial crisis.

But the difference between the two groups is that the consumer/industrial group generally offers lower yields and payout ratios. "[While this group offers]much-needed sector diversification (since most dividend growers tend to be financials), they should be held by investors primarily because their underlying business case is attractive," Mr. Vasic said.

It's tempting to look at higher yields in telecom and utilities, but the group offers an example of the danger of high-yield dividend stocks, as Manitoba Telecom Services Inc. cut its dividend substantially this year.

The long term

If you're looking over the long term, the mid-caps have done much better than blue chips. Here's the breakdown:

Capital returns only annualized since 1995:

S&P/TSX competition groups:

Financials: 14.7%

Other financials: 20.9%

Consumer/industrials: 18.2%

Telecom/utilities: 10.2%

S&P/TSX completion index: 7.2

S&P/TSX 60

Financials: 13.2

Non-financials: 11.6

High-yield: 7.5

S&P/TSX 60: 7.5

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