What are we looking for?
Highly sustainable dividend payers set to tap Google's investment in Toronto and – possibly – Amazon's $5-billion (U.S.) second headquarters.
The screen
Google Inc. affiliate Sidewalk Labs recently chose Toronto's waterfront for Quayside – a 12-acre, state-of-the-art neighbourhood and Google's new Canadian headquarters. As well, Toronto appears to be leading those cities outside the United States courting Amazon.com Inc..
As with Amazon's other Canadian suitors, Toronto's diverse, well-educated work force is backed by top-flight universities attracting international talent.
In today's search, we cast our net wide for companies that will provide the necessary workspace, hire and train industry professionals and build the infrastructure needed for thousands of tech workers.
We then used our TSI Dividend Sustainability Rating System to pinpoint six companies. Our system awards points based on:
- One point for five years of continuous dividend payments – two points for more than five years;
- Two points if those payments have been raised in the past five years;
- One point for management’s public commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to currency exchange rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividend payments;
- One point if the company’s a leader in its industry.
Publicly traded companies with 10 to 12 points have the highest sustainability rating, while those with seven to nine points are above average; four to six points, average; and one to three points, below average.
More about TSI Network
TSI Network is the online home of the Successful Investor Inc. – Pat McKeough's widely followed group of Canadian investment newsletters. They include our award-winning flagship newsletter, the Successful Investor, which covers TSX index stocks. The TSI Dividend Advisor is a 2016 addition. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks set to tap Toronto's explosive growth as a tech hub. RioCan REIT and Allied Properties REIT have extensive holdings in Toronto, including the warehouse space tech startups covet. Dream Office REIT is right alongside them: It has just completed its portfolio shift to focus on Toronto and other major cities. Calian Group Ltd. provides contract information-technology professionals, while Morneau Shepell Inc. leads with human resources and benefits consulting – here and in the United States. That's a big plus for American firms looking to adapt to Canadian employment practices. And SNC-Lavalin Group Inc. is uniquely positioned to build the tech park, and the light rail to move its workers. All six of our top stocks appear in the accompanying table.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.