WHAT ARE WE LOOKING FOR? We'll continue our search for good dividend companies this week. Today, let's take a look at the S&P/TSX Canadian dividend aristocrats index.
MORE ABOUT TODAY'S SCREEN S&P defines a Canadian dividend aristocrat as a company or trust that has increased cash dividends for at least five years.
The security must be listed on the Toronto Stock Exchange and have a minimum market capitalization of $300-million. The index is rebalanced once a year in December. The index is weighted by indicated dividend yield and no stock may be weighted greater than 8 per cent of the index and no trust more than 5 per cent. The Claymore S&P/TSX Canadian Dividend ETF is designed to track this index.
The index currently has 56 members. We'll sort the list today by highest yield.
WHAT DID WE FIND? Canadian banks and insurance companies used to be the foundation of consistent dividend growth in the country, but this has clearly changed in the past couple of years. Among the large-cap financial names in the country, only the Power Corp. family of financial services companies, Toronto-Dominion Bank and Bank of Nova Scotia still qualify for this index.
That said, there is still a reasonable selection of stocks and trusts that offer consistent payout growth in the country. Almost half of the index has a yield of more than 3 per cent now.
Keep in mind that it can be dangerous to decide to buy a stock or trust because it has a high yield, even if the company has raised payouts consistently in recent history. A high yield can often mean the market believes the payout is about to be cut. More research is definitely required.