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What are we looking for?

Companies that have raised their dividends consecutively over the past three years and that are expected to continue doing so over the next two.

The screen

The world economy has been on a geopolitical rollercoaster over the past few years, encompassing a myriad of events including a trade war with China, a global pandemic, supply chain shortages, war in Ukraine, the return of inflation and the end of zero interest rates. Few companies have been able to thrive through all these market conditions and accordingly raise their dividends. Dividend increases signal confidence in that company’s ability to maintain a higher payout, which normally occurs in tandem with rising cash flows.

To identify resilient dividend-raisers, we began by using FactSet’s Universal Screening tool to pull every security listed on a Canadian exchange. We further narrowed down our list using the parameters below:

  • Market capitalization above $1-billion
  • Dividend yield above 4 per cent, and also above the two-year Government of Canada bond yield (currently 3.6 per cent)
  • Three years of consecutive dividend increases, from 2020-2022
  • Analyst projections of continued dividend increases in 2023 and 2024
  • Dividend payout ratio less than 50 per cent, indicating minimal cash flow concerns with future dividend increases

We ranked the 10 remaining companies by dividend yield.

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What we found

10 Dividend growth stocks with staying power

RANKCOMPANYTICKERFACTSET SECTORFACTSET INDUSTRYRECENT CLOSE ($)MKT. CAP. ($ MIL.)DIV YLD. (%)1Y. TTL. RTN. (%)YTD. TTL. RTN. (%)DIV. PAYOUT RATIO (%)2021 DPS ($)2022 DPS ($S)2023 DPS ESTIM. ($)2024 DPS ESTIM. ($)
1Artis Real Estate Investment TrustAX-UN-TFinanceReal Estate9.721,125.56.2-13.27.945.90.590.600.620.65
2Allied Properties Real Estate Investment TrustAP-UN-TFinanceReal Estate29.833,816.95.9-28.616.546.51.701.751.771.80
3Canadian Imperial Bank of CommerceCM-TFinanceBanking58.5853,086.35.7-25.27.048.82.923.273.543.75
4Canadian Western BankCWB-TFinanceBanking26.802,527.94.8-29.411.435.91.161.221.301.42
5Cogeco Communications Inc.CCA-TTelecommunicationsTelecommunications69.583,116.44.5-27.1-9.431.02.562.823.103.38
6Sun Life Financial Inc.SLF-TFinanceInsurance64.7937,988.74.4-6.23.149.62.312.763.003.21
7Canadian Natural Resources LimitedCNQ-TEnergyUpstream Energy76.8085,020.04.425.42.127.32.003.103.423.55
8Granite Real Estate Investment TrustGRT-UN-TFinanceReal Estate76.314,861.34.2-19.610.532.53.013.113.183.25
9Toronto-Dominion BankTD-TFinanceBanking89.10162,313.54.1-9.32.837.53.163.563.784.30
10Lundin Mining CorporationLUN-TNon-Energy MaterialsMining and Mineral Products8.956,958.64.0-12.47.740.90.300.360.380.38

Source: Factset

While nine of our 10 companies have a negative one-year total return, they have all gotten off to a blistering start in 2023 with an average year-to-date total return of 6 per cent over the first few weeks of the year.

Canadian Natural Resources CNQ-T, an oil and gas producer and the only energy company passing our screen, ranked number six with a 4.4-per-cent dividend yield and 25.4-per-cent one-year total return. The company has benefited from recently higher oil and gas prices but has also shown resiliency by raising its dividend from 2020-2021, when the outlook for oil and gas was poor. Finally, the company is expected to raise its dividend in 2023 by 10.3 per cent, topping forecast hikes from all other companies on our screen.

Canadian Imperial Bank of Commerce CM-T and Toronto-Dominion Bank TD-T were the only two of the “Big Five” Canadian banks that passed our screen. All five of these banks have developed a reputation for stable dividend increases over several decades, however CIBC and TD are the only ones that met our dividend payout ratio and dividend yield requirements – and hence may be the best positioned of the group. Both are projected to raise their dividends by more than 6 per cent in 2023.

Disclaimer: The information in this article is not investment advice. FactSet assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.

Full disclosure: The author personally owns shares of CIBC and TD.

Arjun Deiva, CFA, is regional director of FactSet Canada’s Consulting Division.

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