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What are we looking for?

High, sustainable and growing dividends among Canadian companies.

The screen

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

  • A minimum market capitalization of $500-million;
  • An economic performance index, or EPI (return on capital divided by cost of capital) greater than 1.0. An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
  • A return on capital of 10 per cent or higher;
  • 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 flows, 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 2 per cent or higher;
  • A positive dividend growth rate on the one-, two-, three- and four-year horizons;
  • Increasing earnings per share over 12 months (not shown in table).

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 list of criteria. Not surprisingly, the group is dominated by the financials sector (10 out of the 13 companies).

Magna International Inc. stands as the strongest dividend grower on all horizons and has the lowest payout ratio. If its profits and cash flows don't decline too much in the coming years, Magna should have the ability to maintain a high dividend growth rate.

Among the banks, Toronto-Dominion Bank seems to be the best option given its higher dividend growth rates and similar dividend yield.

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.

Large caps whose dividends are rising

CompanyTickerMarket Cap. ($Mil)EPIR/CFCF/CapitalDiv. PayoutDiv. Yield1Yr Div. Growth Rate2Yr Div.Growth Rate3Yr Div. Growth Rate4Yr Div. Growth Rate
Royal Bank of CanadaRY-T136,2901.616.3%2.8%45%3.9%5.7%5.9%7.6%8.6%
Toronto-Dominion BankTD-T119,4201.714.7%3.1%44%3.7%8.2%8.3%9.2%10.0%
Bank of Nova ScotiaBNS-T92,7501.314.0%0.1%47%3.9%5.7%5.9%6.1%6.6%
BCE Inc.BCE-T53,4701.810.5%1.1%88%4.8%5.1%5.1%5.3%5.0%
Manulife Financial Corp.MFC-T48,5601.212.0%2.3%43%3.3%9.9%10.8%14.5%10.7%
Sun Life Financial Inc.SLF-T29,2901.813.0%1.8%40%3.7%7.4%7.3%5.3%3.9%
Power Financial Corp.PWF-T24,1701.716.9%1.2%52%4.9%5.2%5.6%4.8%3.6%
Magna International Inc.MG-T21,6401.614.0%6.9%19%2.4%12.5%19.8%22.9%23.4%
Intact Financial Corp.IFC-T13,3901.510.0%2.3%48%2.5%9.9%9.9%9.9%9.8%
Power Corp. Of CanadaPOW-T12,7102.726.9%1.3%45%4.7%7.5%7.4%5.5%4.1%
Industrial Alliance InsuranceIAG-T5,6601.112.5%2.1%26%2.6%9.8%10.4%9.9%8.1%
Transcontinental Inc. TCL.A-T1,8201.411.3%5.9%30%3.4%8.6%7.8%8.3%6.8%
First National FinancialFN-T1,5705.249.3%1.0%47%7.1%12.3%8.0%1.6%9.4%

Source: StockPointer