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What are we looking for?

Sustainable dividends benefiting from the rise of cryptocurrencies and blockchain.

The screen

Red-hot bitcoin continues to hit new highs, largely on fears huge government deficits and stimulus spending will undermine the U.S. dollar and other government-issued currencies.

With their focus on security and anonymity, digital currencies rely on shared computer ledgers – or blockchain – to verify their transactions.

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In fact, we’re suggesting income seekers look past cryptocurrencies – and their inherent volatility – to blockchain. In its varying forms, blockchain will play a key role in building future transaction systems for banks, stock exchanges and others.

Our search started with dividend-paying companies profiting from cryptocurrencies and blockchain. To mitigate investor risk, we then identified those with diverse operations – outside of cryptocurrencies. From there, our TSI Dividend Sustainability Rating System evaluated each for eight 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’s 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 six stocks. Microsoft Corp. offers a range of blockchain services to clients such as Starbucks Corp., which relies on blockchain to let environment-focused customers trace the supply chain for its coffee beans. Nvidia Corp. makes complex computer chips used to verify cryptocurrency transactions. (Nvidia’s very meagre yield reflects the stock’s meteoric rise of 118 per cent in 2020.) Intel Corp. is catching up with its own specialized chips. International Business Machines Corp. continues to expand its blockchain tracking and payment systems. CME Group Inc. is the world’s largest derivatives exchange – and that includes bitcoin futures. Meanwhile, JPMorgan Chase & Co., the largest banking firm in the United States, aims to lead in the use of blockchain to speed up and reduce the costs of global payments.

Sustainable dividends benefiting from the rise of cryptocurrencies and blockchain

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%)Recent Price (US$)
1Microsoft Corp.MSFT-QHighest$10.001.11,647.4033.5212.25
2JPMorgan ChaseJPM-NAbove Average$9.002.7383.00-4.8131.55
3IBM Corp.IBM-NAbove Average$8.005112.4-3.6129.29
4Intel Corp.INTC-QAbove Average$8.002.6207.4-14.651.1
5CME Group Inc.CME-QAbove Average$8.001.864.3-5.8193.38
6Nvidia Corp.NVDA-QAbove Average$8.000.1331.9112.9504.58

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.

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

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