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What are we looking for?

Sustainable dividends from private equity players seeking opportunities that have arisen because of the pandemic.

The screen

Canadian buyout firm Onex Corp. has said it will use its strong cash position to invest in or purchase firms distressed by COVID-19’s fallout.

Troubles for the travel, entertainment, restaurant, casino and energy industries, in particular, offer private equity players a chance to pick up holdings at highly distressed prices.

To cut risk, those funds can invest through debt or preferred shares, providing a senior claim on assets in a bankruptcy. Taking that route also offers them continuing income and usually the option to convert those instruments into equity positions.

Our search started with dividend-paying Canadian and U.S. private equity firms well positioned to pluck bargains from today’s economic carnage. From there, we applied our TSI Dividend Sustainability Rating System, awarding points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point for an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of the Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated seven stocks. Onex Corp. has a track record of success in private equity deals – apart, perhaps, from its unexpectedly ill-timed purchase of WestJet Airlines Ltd. last year. This country’s other titan in private equity markets, Brookfield Asset Management Inc., focuses on struggling industries with turnaround potential. Meanwhile, KKR & Co. Inc., Carlyle Group Inc., Ares Management Corp., Blackstone Group Inc. and Apollo Global Management Inc. are all leading global private equity players with lots of dry powder to take advantage of attractive, if currently depressed, long-term opportunities.

We advise investors to do additional research on investments we identify here.

Select Canadian- and U.S.-listed private equity firms

Ranking*CompanyTickerDividend Sustain. RatingPointsMkt. Cap. ($ Bil.)**Div. Yld. (%)1Y Ttl. Rtn. (%)Recent Price ($)**
1Brookfield Asset ManagementBAM-A-TAbove Average969.51.54.644.34
2Carlyle Group Inc.CG-QAbove Average89.74.438.428.09
3KKR & Co. Inc.KKR-NAbove Average828.71.919.528.67
4Onex Corp.ONEX-TAbove Average86.40.6-16.065.48
5Apollo Global ManagementAPO-NAbove Average720.64.849.947.68
6Ares Management Corp.ARES-NAbove Average74.94.439.937.14
7Blackstone Group Inc.BX-NAbove Average766.23.538.956.46

Source: Dividend Advisor

 *Ranking is determined by TSI Dividend Sustainability Score.
Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.
**Share price and market cap are in native currency. 

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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