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What are we looking for?

Sustainable dividends from food retailers now experiencing the same sort of surge in online orders as Amazon.com in the wake of the COVID-19 shutdown. (Amazon itself, unfortunately, does not offer a dividend.)

The screen

Top supermarket chains in the United States and Canada continue to build on their strong market positions to meet consumer demand during the pandemic. This should help steady their sales and profit in the difficult times ahead for the economy.

What’s more, these chains are expanding quickly online, offering high-demand curbside pickup in addition to home delivery. That adaptability, despite the big stock-market drop, sets investors up for future gains even after the crisis breaks.

Our search started with Canadian and U.S. dividend-payers experiencing a boost during the pandemic. From there, we applied our TSI Dividend Sustainability Rating System, awarding points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point for an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated six stocks. Loblaw Cos. Ltd., with its Shoppers Drug Mart chain, plus Metro Inc., with its Jean Coutu pharmacies, continue to deliver food, drugs and more to Canadians in these tough times. Empire Co. Ltd.'s multiple banners include Sobeys, Safeway, FreshCo, IGA and Farm Boy. Leading grocery and pharma providers Costco Wholesale Corp. and Walmart Inc. operate in Canada and the United States. Meanwhile, major U.S. supermarket chain Kroger Co. is now benefiting from its early expansion into the online marketplace.

We advise investors to do additional research on any investments we identify here.

Select food-retailer stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsMkt. Cap. ($ Bil.)**Div. Yld. (%)1Y Ttl. Rtn. (%)Recent price $**
1Kroger Co.KR-NHighest1025.02.025.832.03
2Walmart Inc. WMT-NHighest10365.41.725.6128.76
3Loblaw Cos. Ltd.L-THighest1026.41.710.072.83
4Metro Inc.MRU-THighest1015.11.517.959.48
5Costco WholesaleCOST-QHighest10138.70.826.0310.27
6Empire Co. Ltd.EMP-A-TAbove Avg.97.91.62.630.67

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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