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What are we looking for?

Canadian-listed companies with reliable earnings and stable dividend growth.

The screen

In late April, the Bank of Canada surprised investors by greatly upgrading its forecast for economic growth, providing optimism for Canadian businesses. Also, as provincial governments loosen COVID-19 restrictions, allowing business to reopen, it is a great opportunity for investors to consider adding new stocks to their investment portfolio. Today we screen for companies that have proven their stability during the pandemic, by focusing on reliable earnings and consistent dividend growth.

  • First, we screen for dividend-paying companies with a market capitalization exceeding $2-billion.
  • Next, we screen for companies with reliable earnings that are likely to persist. We use the StarMine Earnings Quality model to screen for companies with a score of 70 or higher. The Earnings Quality model is a percentile ranking of stocks based on sustainability of earnings, with 100 representing the highest rank. The model considers that companies with persistent, high quality earnings have strengthening fundamentals and are likely to perform well in the future.
  • Lastly, we screen for companies with a five-year average dividend growth that exceeds 10 per cent. A history of strong annual dividend growth can signal long-term profitability for a company. Also, companies that have been able to continue to increase their payout during the pandemic show they can remain stable even during the most difficult times.

More about Refinitiv

Refinitiv, a London Stock Exchange Group business, is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv provides information, insights and technology that drive innovation and performance in global financial markets, enabling the financial community to trade smarter and faster, overcome regulatory challenges, and scale intelligently.

What we found

Reliable and stable TSX-listed companies

CompanyTickerEarns. Quality Rank5Y Div. Grth. Rate (%)Mkt. Cap. ($ Mil.)1Y Ttl. Rtn. (%)Div. Yld. (%)Recent Close ($)
Quebecor Inc.QBR-B-T9065.27,98914.73.432.50
Canadian Tire Corp.CTC-A-T8616.712,08570.52.4194.73
Goeasy Ltd.GSY-T8635.12,625197.91.7159.45
Toromont IndustriesTIH-T8512.78,77360.01.3106.28
Enghouse SystemsENGH-T8017.43,119-
Magna Int'l Inc.MG-T7912.734,28494.11.8114.56
Barrick Gold Corp.ABX-T7817.245,553-28.91.725.53
CCL Industries Inc.CCL-B-T7519.112,39759.31.269.00
Element Fleet Mgt.EFN-T7451.66,27744.21.814.41
FirstService Corp.FSV-T7010.59,42657.30.4214.34

Source: Refinitiv

The screen, ranked by the StarMine Earnings Quality model, produced five companies, two of which we note here.

Quebecor Inc. produced the highest Earnings Quality score at 90. The effects of the pandemic have certainly affected its operations over the past year. However, the telecom has performed well, which was driven by a strong increase in mobile subscribers and continued growth in new internet customers. Quebecor’s five-year dividend growth rate of 65.2 per cent is the highest in the screen. The company has been able to consistently raise its dividend year after year, signalling it expects to remain profitable for the foreseeable future.

Canadian Tire Corp. Ltd. tied with non-prime lender Goeasy Ltd. for the second-highest Earnings Quality score, at 86. The retailer’s performance throughout the pandemic has remained strong, even though several stores were forced to temporarily close. The company’s earnings stability was largely driven by online sales, which were up more than 250 per cent during the second quarter and should continue to provide value as the country begins to reopen. Canadian Tire’s dividend growth has been steady over past five years and there are no signs to suggest it will slow. Its annual dividend per share, currently at $4.70 and yielding 2.4 per cent, should rise to $5.22 in 2022, according to a consensus of analyst estimates.

Investors are advised to do their own research before trading in any of the securities shown.

Erik Foo, CFA, proposition sales specialist at Refinitiv, covering research and portfolio management sales.

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