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What are we looking for?

Cybersecurity stocks offering growth – and sustainable dividends.

The screen

A cyberattack compromising 130 Twitter accounts – included those of former U.S. president Barack Obama, Tesla chief executive Elon Musk and reality TV star Kim Kardashian – played havoc with the platform last week. Still, the hack also served to highlight the very favourable outlook for top cybersecurity stocks.

The rise in cyberattacks generally – and the growing awareness among businesses, governments and consumers alike – is raising demand for cybersecurity software. We’re looking for dependable dividend payers among the tech firms offering that protection. While almost all cybersecurity leaders channel their cash flow into high research spending, a select few also reward investors with sustainable dividends.

We applied our TSI Dividend Sustainability Rating System to an extensive list of leading cybersecurity firms paying dividends. The system awards 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 if the company is a leader in its industry.

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 six stocks. NortonLifeLock Inc. (formerly Symantec) is a global leader in combatting cyberthreats aimed at individuals. Networking leaders Cisco Systems Inc. and Juniper Networks Inc. include strong cybersecurity in their products. A wide range of U.S. federal government agencies, including the FBI, Department of Homeland Security and the armed forces, rely on ManTech International Corp.’s software and technical support. Leidos Holdings Inc. offers similar cybersecurity to government, health care organizations and private enterprises. Vancouver’s Absolute Software Corp. specializes in providing data security for firms that have mobile devices connecting to their networks.

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

Select cybersecurity stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)**1Y Ttl. Rtn. (%)Recent price ($) **
1Cisco Systems Inc.CSCO-QAbove Average93.1198,532.0-18.846.90
2Juniper NetworksJNPR-NAverage53.37,999.2-8.324.49
3NortonLifeLock Inc.NLOK-QAverage52.411,745.444.020.70
4ManTech Int'l Corp.MANT-QAverage51.92,663.3-1.266.38
5Leidos Holdings Inc.LDOS-NAverage51.512,658.014.591.37
6Absolute SoftwareABT-TAverage42.1658.798.215.40

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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