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number cruncher

What are we looking for?

Sustainable dividends from companies buoyed by a recent change in the C-suite.

The screen

This week’s return of former CEO Bob Iger to Walt Disney Co. spurred the stock to gain as much as 9 per cent. Still, the appointment is just one of several recent C-suite changes, across various industries, that have lifted market expectations as well as company prospects. (In Disney’s case, investors also hope Mr. Iger will eventually reinstate their dividend, suspended in 2020.)

While some firms find chief executives from inside their organization, others bring in new blood. Beyond revenue and earnings gains, success ultimately hinges on the confidence new CEOs engender in the board of directors, but also in the teams they lead.

We think the best new CEO hires make a big difference in the fortunes of their companies, including protecting and, indeed, deepening dividend sustainability.

We started this search with an extensive list of dividend-paying stocks, before singling out those with new CEOs, appointed this year, on the basis of proven track records and deep market knowledge. We then applied our Dividend Sustainability rating system, which awards 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 to cover dividends;
  • One point if the company’s 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, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Dividend-paying companies with a recent change at the helm

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Bil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Canadian National RailwayCNR-THighest101.7113.72.1168.69
2Bank of Nova ScotiaBNS-TAbove Average95.884.0-15.070.91
3Home Depot Inc.HD-NAbove Average92.4332.6-21.3321.51
4Cummins Inc.CMI-NAbove Average82.535.310.1250.86
5Starbucks Corp.SBUX-QAbove Average82.1113.0-12.499.52
6Finning International Inc.FTT-TAbove Average72.94.9-7.632.11
7Nutrien Ltd.NTR-TAbove Average72.456.321.2106.82
8Teck Resources Ltd.TECK.B-TAverage51.123.032.645.85

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.

Our TSI Dividend Sustainability Rating System generated eight stocks.

Toronto-based Bank of Nova Scotia is the country’s fourth-largest bank by market capitalization. It just appointed former Finning International Inc. CEO Scott Thomson as its new chief executive. Meanwhile, Vancouver-headquartered Finning quickly replaced its departed CEO with stalwart Kevin Parkes, who served as the company’s chief operations officer. Seattle’s Starbucks Corp. is the world’s biggest retailer of specialty coffees. Laxman Narasimhan is now the new CEO, expected to build on expansion under interim CEO Howard Schultz, who served two previous stints in that chair.

Home Depot Inc., headquartered in Atlanta, now has a new CEO. Company veteran Ted Decker replaces another veteran, Craig Menear – a move that ensures continuity. Jennifer Rumsey, the new CEO of Indiana-based Cummins Inc., moved up to the top job this year with expectations she’ll expand gains made under the former CEO of 10 years, Tom Linebarger. Nutrien Ltd., headquartered in Saskatoon, should continue to profit from strong global demand for fertilizer under Ken Seitz, who moved into the C-suite in August. Teck Resources Ltd., based in Vancouver, now has a new CEO after Don Lindsay’s 17-year stint in the job. Jonathan Price, hired from giant BHP Group Ltd. in October, 2020, is now Teck’s chief executive. And finally, Montreal’s Canadian National Railway Co. has a new CEO – Tracy Robinson joins CN from TC Energy Corp., and previously spent almost three decades at Canadian Pacific Railway Ltd.

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

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

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