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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

(Feng Yu/Getty Images/iStockphoto)
(Feng Yu/Getty Images/iStockphoto)

Number Cruncher

Pleasing payouts with the best yet to come Add to ...

What are we looking for?

Dividend stocks with the capacity to maintain – and even grow – their payouts.

While lush yields are attractive at first glance, they can be trouble if they strain a company’s ability to pay. The best dividend investments tend to be companies with growing earnings and strong streams of cash flow that can easily support their current payouts.

How we did it

Craig McGee, senior consultant at Morningstar Canada, screened Canadian stocks based on the following criteria:

  • Market capitalizations of more than $500-million;
  • Expected yields of more than 3 per cent;
  • Payout ratios of less than 75 per cent (the payout ratio is a company’s expected dividends as a fraction of its expected cash flow);
  • Positive expected year-over-year growth in earnings per share (EPS);
  • Positive growth rates over the past five-years in EPS, cash flow and sales.

The 15 top stocks on these criteria are ranked in the table using a combination of the three five-year growth rates.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.

What we found

The 15 stocks in the table feature yields as high as 7 per cent. Remember, though, that an investor is ultimately rewarded through a combination of dividends and growth, so don’t choose any stock based purely on its yield.

As always, it’s important to do your own research by reading annual reports and analysts’ coverage. While a screen such as this can turn up interesting possibilities, it’s important to satisfy yourself that there are not issues that lurk behind the numbers.

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Follow on Twitter: @IanMcGugan


Dividend yield with positive growth

Rank Company Symbol Expected
Yr over yr
EPS Gwth
1 Cdn Energy Services CEU-T 5.7% 57.9% 23.3%
2 Constellation Software CSU-T 3.2% 49.3% 14.1%
3 Wi-LAN Inc. WIN-T 3.1% 30.2% 22.9%
4 First National Fin FN-T 7.0% 68.1% 13.8%
5 Black Diamond Group Ltd BDI-T 3.5% 21.9% 41.7%
6 Boardwalk REIT BEI.UN-T 3.1% 63.5% 2.3%
7 Morguard REIT MRT.UN-T 5.3% 64.9% 2.1%
8 Rogers Communicat.,B RCI.B-T 3.5% 21.8% 3.7%
9 Shaw Communications, B SJR.B-T 4.5% 30.8% 6.7%
10 Northern REIT Stp Unit NPR.UN-T 4.8% 66.5% 39.0%
11 TMX Group Ltd. X-T 3.1% 39.8% 20.1%
12 Emera Inc. EMA-T 3.9% 40.5% 5.0%
13 National Bank of Canada NA-T 4.3% 28.4% 3.9%
14 Corus Entertainment, B CJR.B-T 4.0% 45.9% 0.3%
15 Baytex Energy Corp. BTE-T 5.9% 56.3% 15.1%

The 15 qualifying stocks are ranked using the best combination of the three 5-year growth rates. Source: Morningstar Canada


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