If the economy is heading for a double dip, someone ought to tell Tim Hortons Inc., Telus Corp. and Canadian National Railway Co.
Even as stock markets suffer gyrations reminiscent of the 2008 financial meltdown, these and other companies have been rewarding shareholders with hefty dividend increases, providing a silver lining to the gloom that has descended on the economy.
Others, such as Teck Resources Ltd. and Domtar Corp., have reinstated dividends that they previously suspended. A few, including Starbucks Corp., have started paying dividends for the first time.
At a time when governments and consumers are grappling with economic uncertainty and onerous debt levels, the flurry of recent dividend hikes underlines the strength of corporate balance sheets and the confidence companies have that the recovery will continue, analysts say.
“They’re seeing revenue increases, they’re seeing profit growth and they’re confident enough to pay more of the cash flow back to shareholders,” said Tony Demarin, president and chief investment officer of BCV Asset Management in Winnipeg.
A dividend increase “is the biggest signal one can receive” that the board of directors is optimistic about the future, he said. “It’s them standing on the mountaintop saying, ‘All is good.’ ”
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Dividend hikes are coming in a range of sectors, including utilities, pipelines, telecoms and consumer goods. At High Liner Foods of Lunenburg, N.S., the board approved a 13.3-per-cent dividend hike last month – its third increase in less than a year.
“We're off to a good start in 2010 and our outlook for the rest of the year remains positive, despite the continued uncertainty in the economy,” said president and chief executive officer Henry Demone, citing the beneficial effects of the strong Canadian dollar and lower raw materials costs.
