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What are we looking for?

High, sustainable and rising dividends among Canadian companies.

The screen

We have screened our Canadian universe of stocks with the following criteria:

  • A minimum market cap of $400-million;
  • A return on capital of 10 per cent or higher;
  • A debt/equity ratio of one or lower;
  • Positive free-cash-flow-to-capital ratio. This ratio gives a sense of how well the company uses the invested capital to generate free cash flow, which could be used to stimulate growth, pay and/or increase dividends, reduce debt, etc. A positive figure is good – 5 per cent and above is excellent;
  • A dividend payout of 100 per cent or lower;
  • A dividend yield of 3 per cent or higher;
  • A positive dividend growth rate on the one-, two-, three- and four-year horizons;
  • An increase in earnings per share over past 12 months (not shown in table).

Results in the accompanying table are sorted by dividend yield.

More about StockPointer

StockPointer is a fundamental analysis tool based on an EVA (economic value-added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 7,500 companies (Canadian stocks, U.S. stocks and American depositary receipts), StockPointer also allows investors to create personalized filters and build custom portfolios.

What did we find?

Thirteen companies fit our criteria. All Big Six banks except Bank of Montreal made the cut, because it generated slightly negative free cash flow in the past 12 months. Boston Pizza comes up as the first company on the list, thanks to its high dividend yield of 6 per cent. The restaurant franchiser opened a net 11 new locations in 2016 across Canada and plans to continue to expand in the coming years. (It now has more than 380 Canadian locations.) CIBC and TD are the two dividend growth leaders in this group, with average annualized growth rates of almost 9 per cent on the one-, two-, three- and four-year horizons.

Investors are advised to do additional research prior to investing in any of the companies mentioned.

Jean-Didier Lapointe is a financial analyst at Inovestor Inc.

Dividend stocks with growing and sustainable payouts

CompanyTickerMarket Cap. ($Mil)R/CDebt/EquityFCF/CapitalDividend PayoutDividend Yield1 Yr Div. Growth Rate 2 Yr Div. Growth Rate 3 Yr Div. Growth Rate 4Y Div. Growth Rate
Boston Pizza Royalties IncomeBPF.UN-T 469 13.6%0.31%76.7%6.0%5%6%4%4%
Genworth MI Canada Inc.MIC-T 3,040 11.9%0.16%36.6%5.4%6%8%9%9%
CI Financial Corp.CIX-T 7,110 28.3%0.57%72.6%5.2%5%6%8%9%
BCE Inc.BCE-T 53,490 10.3%0.91%83.9%4.8%5%5%5%5%
CIBCCM-T 43,000 18.9%0.12%41.1%4.8%9%10%9%7%
A&W Revenue Royalties IncomeAW.UT-T 427 26.6%0.03%92.9%4.5%8%6%1%3%
National Bank of CanadaNA-T 18,500 16.4%0.12%46.3%4.3%5%6%7%8%
North West Co. Inc.NWC-T 1,510 11.6%0.77%77.5%4.0%3%3%3%5%
Bank Of Nova ScotiaBNS-T 94,060 14.0%0.11%47.0%3.9%6%6%6%7%
Sun Life Financial Inc.SLF-T 27,790 12.3%0.22%40.2%3.9%7%7%5%3%
Toronto-Dominion BankTD-T 120,270 14.7%0.13%44.1%3.7%8%8%9%10%
Royal Bank of CanadaRY-T 136,990 16.3%0.12%45.1%3.7%6%6%8%9%
Transcontinental Inc.TCL.A-T 1,940 11.3%0.36%30.4%3.2%9%8%8%7%

Source: Stockpointer