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What are we looking for?

North American dividend stocks poised for growth amid mixed macroeconomic signals.

The screen

Markets rallied after the release of U.S. employment numbers last Friday, as 2.5 million new jobs were added in May, diverging significantly from consensus, which had predicted a loss of eight million jobs. A similar story of optimism was seen after the most recent purchasing managers indexes (PMIs) increased – to 40.6 in Canada (provided by Markit) and to 43.1 in the United States (provided by the Institute for Supply Management). The PMI is a powerful forward-looking indicator of manufacturing activity, with information on a country’s production output, prices, export and import levels, making it a useful proxy for overall economic conditions.

Some, however, are less optimistic about these economic releases. For example, independent research house Trading Places Research urged caution as the U.S. job numbers still show that six out of seven lost jobs have not returned. There are also fears of a second coronavirus wave as regions begin to open up while the U.S. continues to deal with its own civil unrest and socio-economic troubles.

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We look at dividend stocks that are expected to provide a good rate of return for investors in the short term, regardless of mixed signals from the latest economic releases.

  • Our universe is the S&P 500 and S&P/TSX Composite Index.
  • We screen for companies with a dividend yield greater than or equal to 3 per cent. This is approximately the current average dividend yield of the two indexes combined.
  • We also set the Refinitiv Smart Estimate earnings yield to greater than or equal to 5 per cent. Earnings yield takes the earnings per share over the latest 12-month period and divides it by stock price. The Refinitiv Smart Estimate weights this number in favour of analysts who have been historically more accurate and timelier with their releases.
  • Lastly, the PMI reports outline six largest manufacturing subsectors: computer and electronic products; chemical products; food, beverage and tobacco products; petroleum and coal products; fabricated metal products; and transportation equipment manufacturing. We filter our universe for companies operating in similar areas using the Global Industry Classification Standard (GICS) equivalent of these six subsectors.

More about Refinitiv

Refinitiv is one of the 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

Ranked by dividend yield, the screen resulted in five companies.

With working from home becoming the new normal, an increased demand for technology hardware such as laptops and desktops puts HP Inc. in a strong position – a company that generates 66 per cent of its revenue from its personal systems business line, and is geographically diversified to capture demand in both Europe and Asia.

Dartmouth, N.S.-based Chorus Aviation Inc., which provides regional aviation support services such as leasing, contract flying and maintenance, suspended its dividend on April 6 as it deals with the fallout from COVID-19. The company had boasted a dividend yield of 5.9 per cent over the past fiscal year. As Air Canada continues operating domestic and international flights and begins scaling up over the next few months, Chorus Aviation’s crew, maintenance, repair and insurance services will be in greater demand.

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

North American dividend stocks poised for growth

CompanyTICKERGICS Sub-IndustryDiv. Yld. (%)Refinitiv SmartEstimate EPS Yield (%)Mkt. Cap. (US$ Mil.)1Y Rtn. (%)Recent Close *
Altria Group Inc.MO-N Tobacco 6.510.277,884-11.941.91
Chorus Aviation Inc.**CHR-T Airlines 5.913.9449-47.63.72
Seagate TechnologySTX-Q Tech. Hrdwre, Storage, Peripherals 5.39.313,95831.555.63
HP Inc.HPQ-N Tech. Hrdwre, Storage, Peripherals 3.712.224,896-8.617.41
Westshore TerminalsWTE-T Marine Ports & Services 3.411.2797-20.316.51

Refinitiv

*In native currency ** Chorus Aviation dividend suspended April 6

Mansoor Elahi is a customer success manager supporting Refinitiv’s investment and advisory solutions.

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Editor’s note: An earlier version of this article cited Chorus Aviation’s dividend of 5.9 per cent over the past fiscal year but failed to mention Chorus suspended its dividend on April 6.

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