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(Wolfgang Amri)
(Wolfgang Amri)

Portfolio Strategy

Reasons to declare 2010 the year of the dividend Add to ...

There are three reasons 2010 will be an outstanding year for dividends, the first being low interest rates: Rates on bonds and guaranteed investment certificates may start to rise later this year, but the dividend yields paid by many blue-chip companies are still far higher (especially on an after-tax basis). Unpredictable stock markets are another reason. Small speculative stocks led the market to big gains last year, but now there's a widespread feeling that higher-quality stocks will lead the way in an uncertain market environment. A third reason to look to dividend stocks has to do with inflation protection: Many dividend payers increase their quarterly payouts once a year on average, and that will help you keep up against increases in the cost of living. To help you find dividend stocks to investigate for your portfolio, this edition of the Portfolio Strategy presents a lists of top choices from six different sources

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1. Rob Carrick's Own Dividend All-Star Five-Pack

These are dividend-growth stocks that I own. I'm including them here because each of them has a long-term record of increasing dividends, and because each has come through in the past few months with yet another hike.



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg

5-yr Cumulative % price chg.

Cameco Corp.

CCO

27.91

1.0

0.28

49.6

0.1

Canadian National Railway

CNR

56.69

1.9

1.08

38.2

46.9

Fortis Inc.

FTS

28.50

3.9

1.12

24.7

56.2

Rogers Communications

RCI.B

33.87

3.8

1.28

24.8

98.9

TransCanada Corp.

TRP

35.84

4.5

1.60

19.6

17.1

Cameco has a low yield and has missed raising its dividend a few times in the past decade. My oldest holding from among this group is TransCanada, which I bought at $19.84 in 2001. The dividend has been raised nine times since then and now produces a yield of 8.1 per cent based on my upfront investment.













2. David Stanley's Top 11 Dividend Stocks

Mr. Stanley is a retired professor whose avocation is dividend investing. He writes for the magazine Canadian MoneySaver on a dividend strategy that involves buying the 10 highest-yielding stocks in the Dow Jones Canada Titans 60 Index. Here, he has come up with a diversified mix of high-yielding stocks from that same index, all of which offer dividend reinvestment plans (DRIPs).



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg.

5-yr Cumulative % price chg.

BCE Inc.

BCE

29.93

5.8

1.74

20.7

2.2

TransAlta Corp.

TA

22.10

5.2

1.16

16.8

20.0

Bank of Montreal

BMO

59.32

4.7

2.80

109.1

5.6

CIBC

CM

73.28

4.8

3.48

84.9

3.3

Sun Life Financial

SLF

30.75

4.7

1.44

71.0

-23.1

TransCanada Corp.

TRP

35.84

4.5

1.60

19.6

17.1

Bank of Nova Scotia

BNS

49.12

4.0

1.96

78.0

20.2

Fortis Inc.

FTS

28.50

3.9

1.12

24.7

56.2

National Bank of Canada

NA

62.06

4.0

2.48

70.5

14.0

Toronto-Dominion Bank

TD

69.71

3.5

2.44

93.8

37.9

Enbridge Inc.

ENB

47.20

3.6

1.70

27.7

47.5

Mr. Stanley said he picked these stocks with a long-term holding period in mind. Asked to provide 10 names, he came up with 11 because the last two were "too close to call." The approach here focuses on high-yielding stocks, though many of the names have provided dividend growth as well over the years. The average yield for the portfolio at mid-week was 4.5 per cent, compared to 2.7 per cent for the S&P/TSX composite index.













3. The RBC Capital Markets TSX Total Return Screen

In the quarterly investment outlook it released this week, RBC included a list of stocks that look good from the point of view of total return, or the combination of both dividends and capital gains. "A lower trajectory for the North American equity benchmarks is likely to place greater focus on total return strategies," wrote Myles Zyblock, RBC's director of capital markets research.



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg.

5-yr Cumulative % price chg.

National Bank

NA

62.06

4.0

2.48

70.5

14.0

Canadian Western Bank

CWB

22.00

2.0

0.44

107.5

68.9

Corus Entertainment

CJR.B

19.00

3.2

0.60

50.9

34.2

Transcontinental Inc.

TCL.A

12.84

2.5

0.32

78.8

-48.4

Rogers Communications

RCI.B

33.87

3.8

1.28

24.8

98.9

Finning International

FTT

17.68

2.5

0.44

61.5

2.5

Industrial Alliance Insurance

IAG

33.70

2.9

0.98

114

15.0

Ensign Energy Services

ESI

14.90

2.4

0.35

48.0

1.3

RBC's screen required stocks to have a dividend yield of more than 2 per cent, a dividend payout ratio of less than 50 per cent and five-year dividend growth of 10 per cent. The stocks also had to meet RBC's own quality criteria.













4. The Dividend Guy's Top 10 List

The Dividend Guy blog (thedividendguyblog.com) is all about spreading the gospel of dividend-growth investing. Here's the Dividend Guy's list of the 10 best dividend stocks for Canadian investors.



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg.

5-yr Cumulative % price chg.

Cdn. Pacific Railway

CP

55.17

1.8

0.99

56.2

20.2

Royal Bank of Canada

RY

57.50

3.5

2.00

88.0

54.0

TransCanada Corp.

TRP

35.84

4.5

1.60

19.6

17.1

Bank of Nova Scotia

BNS

49.12

4.0

1.96

78.0

20.2

BCE Inc.

BCE

29.93

5.8

1.74

20.7

2.2

IGM Financial

IGM

43.20

4.8

2.05

58.7

11.3

Great-West Lifeco

GWO

27.00

4.6

1.23

88.3

-5.5

Imperial Oil

IMO

39.30

1.0

0.40

-4.7

25.5

Molson Coors Canada

TPX.B

43.50

2.3

1.00

-3.3

-1.1

TransAlta

TA

22.10

5.2

1.16

16.8

20.0

On BCE, the Dividend Guy says the high dividend yield is nice to have, even if he doesn't necessarily see himself holding for the long term. After a little surge in recent days, the price of BCE stock has risen enough to drive the yield just below 6 per cent; he describes Molson Coors as a "fun" choice, but the company bumped up its dividend by 20 per cent last May, and by 25 per cent in May, 2008. His comment on owning RBC shares: "I am a customer as well, so I try to get some of my fees back."













5. George Vasic's Dividend Growth List

Mr. Vasic is a strategist with UBS Securities Canada who has taken a keen interest in dividends over the years. Here's his most recent list of the larger-size companies that have increased their dividends the most from 2004-2009. The stocks are listed from highest dividend growth on down.



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg.

5-yr Cumulative % price chg.

Financials

Power Corp.

POW

30.41

3.8

1.16

76.5

-5.2

Royal Bank of Canada

RY

57.50

3.5

2.00

88.0

54.0

Toronto-Dominion Bank

TD

69.71

3.5

2.44

93.8

37.9

Bank of Nova Scotia

BNS

49.12

4.0

1.96

78.0

20.2

Bank of Montreal

BMO

59.32

4.7

2.80

109.1

5.6

Non-Financials

Rogers Communications

RCI.B

33.87

3.8

1.28

24.8

98.9

Shaw Communications

SJR.B

20.47

4.3

0.88

9.9

70.4

SNC-Lavalin Group

SNC

50.15

1.2

0.60

73.5

129.7

Canadian National Railway

CNR

56.69

1.9

1.08

38.2

46.9

Saputo Inc.

SAP

30.25

1.9

0.58

49.5

66.3

There have been no dividend increases from the big banks since 2007-08, but their long-term dividend growth to that point was stellar. Rogers and Shaw have by far the best growth numbers on this list, with total increases of 87.5 and 60 per cent, respectively.













6. S&P/TSX Canadian Dividend Aristocrats Index

An index of stocks and income trusts that have increased their dividends or distributions every year for at least five years. Here are the 10 largest stock holdings in the index.



Company

Ticker (TSX)

$ Price

% Yield

Annual Div. ($)

1-yr % price chg.

5-yr Cumulative % price chg.

AGF Management

AGF.B

16.98

5.9

1.00

125.5

-1.6

Telus Corp.

T

35.46

5.4

1.90

6.5

-10.6

Power Financial Corp.

PWF

32.17

4.4

1.40

78.7

-6.1

Great-West Lifeco

GWO

27.00

4.6

1.23

88.3

-5.5

IGM Financial

IGM

43.20

4.8

2.05

58.7

11.3

Power Corp.

POW

30.41

3.8

1.16

76.5

-5.2

Methanex Corp.

MX

26.00

26

0.64

202

14.1

TransCanada Corp.

TRP

35.84

4.5

1.60

19.6

17.1

Intact Financial

IFC

43.10

3.2

1.36

34.7

26.2

Bank of Nova Scotia

BNS

49.12

4.0

1.96

78.0

20.2

Trusts are plentiful in this index, but they were excluded here because of the uncertainty surrounding them as we approach the 2011 introduction of a new trust tax. Many trusts are converting into dividend-paying corporations and, in the years to come, some could end up as top dividend names. They'll have to earn their way to this distinction, though. One quick note about the stocks on this list is that Power Financial, IGM and Great-West are part of the Power Corp. family.













All share price information is to March 4. Source: Globeinvestor.com















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