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What are we looking for?

Canadian stocks with an established track record of growing their dividends.

The screen

For the first time in years, investors can earn attractive yields of more than 4 per cent from high-interest savings accounts, government bonds and guaranteed investment certificates. While these yields are appealing on the surface, the annual inflation rate came in at 4.4 per cent in April, outpacing the returns on most of these instruments.

Conventional equities offer higher potential upside, but come with the caveat of higher risk. Canadian dividend payers can offer investors seeking to overcome inflation the best of both worlds – the stability of consistent dividend payouts as well as the price upside that comes with equities. While dividend yields tell one part of the story, we are more interested in dividend growers that have the potential to increase payouts in the future.

We began identifying stable Canadian dividend growers using FactSet’s Universal Screening tool and with the following parameters:

  • Traded on a Canadian exchange
  • Dividend payout ratio less than 50 per cent
  • Five years of consecutive annual dividend increases (from 2017 to 2022)
  • Five-year annualized dividend growth rate greater than 5 per cent
  • Analyst estimates of future dividend increases for the next two years (2023 and 2024)
  • Dividend yield greater than 3 per cent

We ranked the eight remaining companies by their five-year annualized dividend growth rates.

More about FactSet

FactSet is a leading global financial data and technology company. FactSet’s superior suite of content, analytics and workflow services covers the entire life cycle of a portfolio and offers actionable insights for asset managers and investment professionals around the world.

What we found

Proven Growing Dividends

138.3goeasy Ltd.GSY-TFinance110.251,813.
218.3Imperial Oil LimitedIMO-TEnergy65.8638,472.33.0-2.41.312.72.021.891.461.035.8
317.1Canadian Tire Corporation, Limited Class ACTC-A-TConsumer Non-Cyclicals167.359,892.44.14.620.735.47.076.756.284.838.0
412.7iA Financial Corporation Inc.IAG-TFinance89.529,220.43.446.214.833.73.272.982.602.0810.3
510.4Cogeco Communications Inc.CCA-TTelecommunications66.002,933.14.7-29.3-
68.7Toronto-Dominion BankTD-TFinance78.83144,172.24.8-10.1-
77.3Royal Bank of CanadaRY-TFinance123.97171,771.84.40.4-0.744.85.645.354.964.3211.4
85.6Canadian Western BankCWB-TFinance24.582,318.55.4-9.14.835.91.391.301.221.167.0
95.2Canadian Imperial Bank of CommerceCM-TFinance56.9952,303.76.0-10.45.648.83.603.453.272.929.2

Source: FactSet

Six of the nine companies that passed our screen are classified within the finance sector by FactSet. Three of them are large Canadian banks (Toronto-Dominion Bank TD-T, Royal Bank of Canada RY-T and Canadian Imperial Bank of Commerce CM-T), which is unsurprising given the stellar track record of the Big Five that have paid dividends without fail since the 1800s. Meanwhile, other dividend stalwarts such as Enbridge Inc. and BCE Inc. did not meet our stringent criteria of low dividend payout ratios. A low payout ratio suggests that a company can sustainably continue raising its dividend in the future without a mounting debt burden.

Goeasy Ltd. GSY-T, a leading non-prime Canadian lender, topped our screen with a stunning 38.3-per-cent five-year annualized dividend growth rate. Goeasy’s outstanding performance does not stop there. It has increased its dividend per share by a factor of 10 over the past 10 years, paying out $3.64 a share in 2022 compared with 34 cents a share in 2012 (not shown). There is ample opportunity for further growth, as indicated by the modest 42.3-per-cent dividend payout ratio. But investors should be aware that subprime lenders do come with elevated risk – goeasy’s clients have poorer credit scores than those of conventional lenders and are more susceptible to default during worsening economic conditions.

Canadian Tire Corp. CTC-A-T, an iconic Canadian retailer, ranked No. 2 on our screen with a 17.1-per-cent five-year annualized dividend growth rate. Canadian Tire is a highly diversified business that goes beyond retail, operating gas stations and a real estate portfolio. Thus far, the company has outperformed all others that passed our screen, with a year-to-date total return of 20.7 per cent. Investors should be aware that Canadian Tire’s sales and earnings are expected to decline in 2023 (not shown), but its low dividend payout ratio suggests that the forecasted dividend increase should be safe.

Disclaimer: The author personally owners shares in goeasy, TD, RBC and CIBC.

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.

Arjun Deiva, CFA, is a vice-president at FactSet Canada’s consulting division.

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