William Voon
When looking for dividend-paying investments, there's a tendency to focus on real estate trusts, pipelines and oil and gas. But there are many other types of high-yielding equities worth a close look.
Among listings on the Toronto Stock Exchange, there are 221 companies and trusts that fall outside of the traditional focus, says Trevor Johnson, an analyst with National Bank Financial. He has constructed
There are a handful of companies or trusts on the list that are expected to pay out in the low double digits this year. They include Yellow Media (14.8 per cent), Chorus Aviation (11.8 per cent), Data Group Income Fund (11.8 per cent) and New Flyer Industries (11.3 per cent).
But it's not just the big payouts that make the stocks and trusts on this list interesting. These diversified equities outperformed the broader market last year and are continuing to do so again in 2011.
So far this year, the group has a price return of 5.3 per cent, compared with a flat performance by the S&P/TSX composite index, Mr. Johnson says. That builds upon momentum in 2010 when the diversified group's price rose on average by 22.7 per cent, compared with the S&P/TSX's rise of 14.4 per cent. Add the cash yield difference of the two groups (an average 5.5 per cent compared with 2.5 per cent for the benchmark) and the gains are even higher.
"While this theme is losing some steam, we still find a favourable imbalance between demand for income and limited domestic opportunities to source it," Mr. Johnson says.
"We remain cautiously optimistic regarding 2011 sector upside, but it will be difficult for the dividend-payers to sharply outperform the broader market to the same extent, as our analysis suggests stretched equity valuations across all the various subsectors," Mr. Johnson wrote in a recent report.
The top performing subsectors within the diversified group are: technology (a 16.1 per cent price gain), energy services (12.1 per cent) and health/life sciences (11.3 per cent). Two subsectors have lost ground: media (down 3 per cent) and real estate services (down 2.8 per cent), he notes.
The accompanying screen was constructed by Mr. Johnson and last updated on May 11. It lists the highest diversified yields, grouped by market capitalization and liquidity.
The yield is an estimated figure for this year. The liquidity is measured by the average daily trading volume over the last three months.