Skip to main content
// //

What are we looking for?

My team member Allan Meyer and I highlight one of our favourite valuation metrics, free-cash-flow-to-enterprise-value, by analyzing Canadian dividend payers using our investment philosophy focused on safety and value.

The screen

We started with Canadian-listed equities with a market capitalization of $1-billion or more. Market cap is a safety factor, generally larger companies are more stable and liquid.

Dividend yield is the projected annualized dividend divided by the share price. Some investors, particularly retirees, have a thirst for income and many of our clients are in retirement or saving for it. Allan and I also love to get paid while we wait for price appreciation, and dividends generally reflect safety and stability. All securities listed yield 2 per cent or more.

Story continues below advertisement

Dividend payout ratio is the dividend payment divided by earnings. A lower number is better. We’ve capped payout at 100; anything above could be a warning sign.

Debt-to-equity is our final safety measure. It is the debt outstanding divided by shareholders’ equity. A smaller ratio is preferred.

Free-cash-flow-to-enterprise-value (FCF/EV) is a valuation metric. FCF is the cash left over for investors after all expenses, reinvestments and capital expenditures, while EV is a measure of the company’s value excluding its cash. The higher the number, the better the value. All securities listed have a FCF/EV of 4 per cent or more and the list is sorted on this metric, from highest to lowest. In our opinion, “free cash flow is king” because it is more difficult to manipulate compared with other accounting metrics such as earnings.

Earnings momentum is the change in annual earnings over the last quarter. A positive number implies earnings are increasing, which is a proxy for capital appreciation and dividend hikes while the opposite is true for a negative number.

Lastly, we’ve provided the 52-week total return to track recent performance.

What we found

Aecon Group Inc. has the highest FCF/EV and scores well generally for safety and value. Evertz Technologies Ltd., Westshore Terminals Investment Corp., Magna International Inc., Labrador Iron Ore Royalty Corp. and BCE Inc. look interesting on most measures. BCE is also the largest name by market cap. Husky Energy Inc. has the highest dividend yield, but has the most negative earnings momentum. Northland Power Inc. has the highest debt, but looks attractive otherwise. High debt levels are typical for utilities such as Northland.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Story continues below advertisement

Select TSX-listed dividend stocks

CompanyTickerMkt. Cap. ($ Bil.)Div. Yld. (%)Div. Payout Ratio (%)Debt/Equity (%)FCF/EV (%)Earns. Momentum (%)Recent Close ($)52W Ttl. Rtn. (%)
Aecon Group Inc.ARE-T1.13.240.678.325.10.017.971.5
Transcontinental Inc.TCL-A-T1.45.438.782.014.4-7.016.43-20.0
Corus Entertainment Inc.CJR-B-T1.04.829.2108.514.36.05.05-8.0
Labrador Iron Ore RoyaltyLIF-T1.44.639.80.011.2-0.321.94-18.2
Magna International Inc.MG-T21.62.825.941.010.9-2.269.926.4
Leon's Furniture Ltd.LNF-T1.33.440.623.69.8-1.516.6217.3
CI Financial Corp.CIX-T5.43.032.5105.29.2-0.924.3631.5
Westshore Terminals Invstmt.WTE-T1.04.131.945.99.15.215.79-25.4
Pason Systems Inc.PSI-T1.25.497.10.08.6-11.814.01-26.4
Canadian Natural ResourcesCNQ-T46.63.843.064.58.4-2.839.4816.0
Recipe Unlimited Corp.RECP-T1.12.449.685.57.5-11.218.85-28.9
TFI International Inc.TFII-T3.72.325.2146.86.0-0.345.5620.7
Evertz Technologies Ltd.ET-T1.34.174.80.25.60.017.5319.4
Husky Energy Inc.HSE-T8.36.043.631.75.5-22.38.29-43.4
BCE Inc.BCE-T58.15.292.8124.15.4-0.364.4618.9
Northland Power Inc.NPI-T6.03.870.2697.55.42.531.2634.6
Ovintiv Inc.OVV-T5.62.35.760.35.2-2.321.73-48.1
IGM Financial Inc.IGM-T9.55.773.4200.44.5-2.239.7623.4
Rogers Communications Inc.RCI-B-T33.53.049.6211.74.4-3.166.16-4.4

Source: Eikon & Wickham Investment Counsel Inc.

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Follow related topics

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies