What are we looking for?
Dependable dividend stocks for the next year.
More about today's screen
We'll enlist the help of CPMS, as we do each week on Tuesdays. The idea today is to find stocks that have demonstrated strong dividend and earnings growth in the past, as well as ones that have stable earnings and dividend prospects for the coming year.
To pass the screen today, stocks must have a market float of at least $500-million, a dividend yield of at least 2 per cent, the dividend payout ratio must not exceed 80 per cent of the 12-month earnings estimate, dividends cannot have been cut over the last year, total annualized dividend growth cannot be negative over the past five years, and finally, the five-year earnings growth rate must exceed the median of the 680 Canadian companies that CPMS tracks.
More about CPMS
CPMS is a Toronto-based equity research and portfolio analysis firm owned by Morningstar Canada. It maintains a database of the largest and more liquid Canadian stocks, plus another 2,100 U.S. stocks, and spends a lot of time adjusting for unusual accounting items in each company's quarterly results to make sure screens can perform correctly.
What did we find out?
Many names on this list produced solid returns in 2010 and should deliver good yields in the coming year.
Jamie Hynes, senior consultant with CPMS, suggests readers study the difference between price return and the dividend return in the past year. The two columns add up to the final column that calculates total return for the year.
"This screen highlights the boost dividends provide to returns," Mr. Hynes said. "With the S&P/TSX composite up 49 per cent since Dec. 31, 2007 (58 per cent including dividends), chances are dividends will play a more important role in 2011."
Full disclosure: I own shares of Fortis Inc.