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What are we looking for?

Canadian-listed companies that have the capacity to maintain their dividends while exhibiting best-in-class environmental, social and governance (ESG) scores.

The screen

First, we screen for companies with a market capitalization greater than $1-billion.

Next, we screen for companies with a trailing 12-month (TTM) dividend coverage of greater than 200 per cent. Dividend coverage indicates the capacity for a company to pay common dividends out of income available to common shareholders. A value greater than 200 per cent indicates a company could maintain their dividend even if net income were to be cut in half.

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Finally, we screen for companies with an ESG combined score in the top 10 per cent of companies in the S&P/TSX Composite Index. The ESG combined score is an overall company score assigned by Refinitiv based on self-reported information in the environmental, social and corporate governance pillars.

More about Refinitiv

Refinitiv is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv provides information, insights and technology that drive innovation and performance in global financial markets, enabling the financial community to trade smarter and faster, overcome regulatory challenges and scale intelligently.

What we found

The screen, ranked by trailing 12-month dividend coverage, produced eight companies across five sectors, signalling that investors can find ESG friendly companies with sustainable dividends in multiple sectors.

Canadian Pacific Railway Ltd., which ranked highest in dividend coverage and ESG combined score, has benefited from higher rail volumes and strong operating ratios, which have helped boost the share price by 36.8 per cent (total return 38.2 per cent) over the past year. While the yield for CP is the second-lowest among the group, CP has increased its dividend steadily since 2001, and the average estimate of analysts covering the stock has the payout rising by more than 9 per cent in each of the next two years.

CP has also made significant strides to improve its ESG scores, with the social and governance pillars contributing the greatest impact since 2015. CP introduced a human rights policy in 2019 that significantly improved its overall score. The railway is also making improvements in diversity and inclusion, doubling the cultural diversity of its board of directors and introducing diversity in its executive management.

Manulife Financial Corp., which ranked near the bottom in both dividend coverage and ESG combined score, is the only company on the list with a higher dividend yield, at 5.4 per cent, than the S&P/TSX Composite (3.5 per cent), offering an attractive income stream to investors looking for yield in the financial services sector. Despite the total return of the stock of minus 12.1 per cent, analysts are forecasting that the dividend could rise next year, with Morgan Stanley and CIBC World Markets indicating it could increase by more than 4 per cent.

Manulife’s ESG scores have remained relatively flat since 2015, however, like CP, the company did introduce a human rights policy in 2019. Manulife is currently ranked fourth among insurance companies across the Americas for combined ESG score (after top-ranked Sun Life Financial Inc.; Allstate Corp.; and Hartford Financial Services Group Inc.), signalling the company is a top performer within its sector.

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Investors are advised to do their own research before trading in any of the securities shown.

Select TSX-listed dividend stocks

CompanyTickerMkt. Cap. ($ Mil.)Div. Coverage TTM (%)ESG Combined Score1Y Ttl. Rtn. (%)Div. Yld. (%)Recent Close ($)
Canadian Pacific RailwayCP-T59,279.1493.881.438.20.9436.90
Alamos Gold Inc.AGI-T4,626.0487.579.565.70.711.80
Agnico Eagle Mines Ltd.AEM-T23,170.8343.372.423.61.997.55
Cogeco CommunicationsCCA-T4,576.2334.280.7-17.32.794.18
Stantec Inc.STN-T4,377.7274.875.914.41.638.87
Manulife Financial Corp.MFC-T42,385.3243.473.0-12.15.420.80
Loblaw Cos. Ltd.L-T23,023.1228.974.4-5.22.065.70
Yamana Gold Inc.YRI-T6,906.5215.577.858.31.97.22

Source: Refinitiv

Stephen Donovan, MBA, is a customer success leader, Refinitiv buy-side and commodities trading for the Americas.

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