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What are we looking for?

Sustainable Canadian dividend stocks with solid price growth.

The screen

In this week's article, we will focus on large Canadian stocks within the S&P/TSX and look for dividend paying growth stocks. The metrics chosen are the following:

  • Return on capital of 10 per cent and above;
  • Earnings per share (EPS) growth for three-month and 12-month periods above zero (positive);
  • Economic performance index (EPI) of 1 and above – measuring the company’s wealth-creating ability;
  • Market cap of $1-billion and above to filter for larger companies with higher liquidity;
  • 12-month price momentum above zero (positive);
  • Dividend yield of 3 per cent or higher;
  • A positive dividend growth rate on the one-, two-, three- and four-year horizons;
  • Stable or increasing five-year average return on capital (ROC).

Results in the accompanying table are sorted by dividend yield.

More about Inovestor

Inovestor for Advisers is a fundamental analysis application based on the economic value-added (EVA) approach. It aids advisers in quickly identifying attractive investment opportunities and easily communicating them to their clients. In addition to providing detailed reports on more than 13,000 companies (Canadian stocks, U.S. stocks and American depositary receipts), Inovestor allows investors to create personalized filters and build custom portfolios.

What we found

Our filter generated a list of 12 Canadian companies. It is not surprising that almost 60 per cent of the results are companies within the financial sector. The other companies come from a mix of the industrial and consumer discretionary sectors.

Out of the non-financial related stocks, one of them stands out: Chorus Aviation Inc. (CHR-T), a Canadian holding company that offers regional aviation services, offers a dividend yield of almost 5 per cent that has been steadily increasing. In addition, Chorus is undergoing a stable growth in stock price and is creating wealth for shareholders measured by its EPI of 2.2.

Another industrial sector stock that is currently trading at a slight discount is Evertz Technologies Ltd. (ET-T), a manufacturer of digital broadcast and film products. The price has been steady, but with the highest return on capital from a non-financial company of approximately 20 per cent and an EPI of 3.2, it is an interesting opportunity to consider.

Noor Hussain is an account executive for Inovestor Inc.

Select dividend-paying growth stocks

CompanyTickerMarket Cap. ($Mil)Div YieldR/CEPS Chg 3MEPS Chg 12MEPI12M Price Var.1Y Div. Growth Rate2Y Div. Growth Rate3Y Div. Div. Growth Rate4Y Div. Growth RateR/C (5Y Avg.)
Summit Industrial Income REITSMU-UN-T1,2356.97%10.5%
Russel Metals Inc.RUS-T2,2725.21%11.1%
Chorus Aviation Inc.CHR-T2,7484.97%14.1%
CI Financial Corp.CIX-T7,7984.70%27.3%
Ag Growth International Inc.AFN-T1,3054.51%10.1%
Evertz Technologies Ltd.ET-T1,3014.15%20.2%
Bank of Nova ScotiaBNS-T96,7383.79%14.3%
Labrador Iron Ore Royalty Co.LIF-T1,5143.68%14.2%
National Bank of CanadaNA-T21,5913.63%17.0%
Royal Bank of CanadaRY-T146,9333.38%15.8%
Transcontinental Inc. (Class B)TCL-B-T2,4983.25%12.4%
Transcontinental Inc. (Class A)TCL-A-T2,8443.22%11.0%
Group Average(12/2306)24,0654.29%14.8%

Source: Inovestor