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What are we looking for?

Canadian large-cap stocks with strong and secure dividends and a track record of growing dividend payouts.

The screen

We will be using Trading Central Strategy Builder to search for Canadian stocks with attractive and growing dividends and the capacity to continue paying these dividends even in the event of an economic downturn.

We will start by screening for Canadian stocks with a market capitalization of $1-billion or more. This will limit our search to the largest and most stable stocks in the Canadian market. To find stocks with attractive dividend levels, we will screen for dividend yields of 3 per cent or more. One principle of dividend investing is to also look for companies with a history of growing their dividend payments. To do this, we will screen for five-year dividend growth rates of 10 per cent or more annualized.

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Last, to identify stocks whose dividends are sustainable, in the event of an economic downturn, we will screen for a dividend coverage ratio of 150 per cent or more. The dividend coverage ratio is calculated by dividing the company’s earnings over the past 12 months by the dividends paid in the same period and then expressing the result as a percentage. This measure tells us how many times the company’s earnings can cover the dividend payout – higher dividend coverage ratios are preferred.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Trading Central’s product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange traded funds (ETFs), indexes, foreign exchange (forex), options and commodities.

What we found

Topping our list is insurance giant Manulife Financial Corp. with a 4.5-per-cent dividend yield and 12.1-per-cent five-year average dividend growth rate. Manulife’s stock has had a rough ride over the past 12 months, down almost 6 per cent. However, the stock has come back strongly in 2019 and has rallied 19 per cent year-to-date. Manulife’s dividend is the highest on our list and looks very sustainable with a 256-per-cent dividend coverage ratio.

The only resources stock to make our list is Canadian Natural Resources Ltd., which has attractive dividend characteristics with a 3.8-per-cent yield and a 15.1-per-cent five-year average dividend growth rate. Although the past year has been challenging for many energy stocks, Canadian Natural’s strong dividend yield makes this stock suitable for investors seeking income and exposure to the Canadian energy sector.

The largest company on our list is Toronto-Dominion Bank with a market cap in excess of $137-billion. In February, TD announced first-quarter results that included a boost to the quarterly dividend by 10.4 per cent to 74 cents a share. However, quarterly earnings slightly missed analyst expectations, which resulted in a decline in the stock price of almost 3 per cent. These two factors have caused TD’s dividend yield to rise to nearly 4 per cent – the highest level in many years.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Canadian stocks with solid and growing dividends

RankCompanyTickerRecent Price ($)Market Cap. ($Mil)Div. YieldDiv. Growth Rate (5Yr Avg.)Div. Coverage Ratio
1Manulife Financial Corp.MFC-T22.6544,1474.5%12.1%256%
2NFI Group Inc.NFI-T31.951,9924.4%14.4%282%
3IA Financial Corp.IAG-T51.135,5513.2%10.2%352%
4Canadian Natural Resources Ltd.CNQ-T37.0944,5023.8%15.1%158%
5Toronto-Dominion BankTD-T75.16137,7584.0%8.9%225%
6Atco Ltd.ACO-X-T45.405,2073.6%15.0%190%
7Intertape Polymer Group Inc.ITP-T18.751,1034.3%19.7%181%
8Domtar Corp.UFS-T66.884,2303.4%9.1%258%
9Aecon Group Inc.ARE-T18.351,1103.1%10.1%188%

Source: Trading Central

Peter Ashton is vice-president of customer success at Trading Central.

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