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What are we looking for?

Many major markets are starting the year off with a bang – reaching new highs, much to investors’ delight. However, this has been accompanied by plenty of volatility, speculation and large trading swings (just ask the Reddit traders making headlines). As a result, my team member Allan Meyer and I thought we would take a conservative, classical approach and limit our search to low volatility, blue-chip stocks using our investment philosophy focused on safety and value.

The screen

We started with Canadian-listed equities with a market capitalization of $1-billion or greater. This is a safety factor; larger companies tend to be more stable and diverse. They also tend to offer better trading liquidity.

We used beta to identify our low volatility stocks. Beta measures how much a stock moves relative to the market. We limited the names to those with a beta of less than one. This implies they are less volatile than the market and we sorted on this metric from least to most volatile.

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Dividend yield is the projected annualized payout divided by the recent share price. We chose securities that yield 2 per cent or more. Payout ratio is total dividends divided by earnings. A lower figure is preferred: It implies safety and the possibility of future dividend hikes. We have capped the payout ratio at 100 – anything above that level could signal the potential for a dividend cut.

Debt-to-equity is our final safety measure. It is the debt outstanding divided by shareholders’ equity. A smaller ratio indicates a company has lower levels of debt or leverage.

Price-to-earnings is a valuation metric: The lower the number, the better the value. (We limited the screen to profitable companies, in line with the higher-quality nature of our investment philosophy.)

Quarterly earnings momentum is the most recent annualized earnings compared with the same figure one quarter ago. A positive number means earnings are increasing and vice versa for a negative number. Lastly, we have provided the 52-week total return to track recent performance.

What we found

In general, you can see consumer staples, utilities and financials dominate the list, and many names look appealing. Loblaw Cos. Ltd., North West Co. Inc., Leon’s Furniture Ltd. and Great-West Lifeco Inc. score well for safety and value. Loblaw is the only name with a negative beta, meaning it’s the least correlated to the market and its price may rise if the markets fall. Leon’s boasts the lowest payout ratio, while Great-West has the best value. Evertz Technologies Ltd. is the only name that carries almost no debt, while Maple Leaf Foods Inc. has the best earnings momentum.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Select TSX-listed dividend stocks 

CompanyTickerMkt. Cap. ($ Bil.)BetaDiv. Yld. (%)Payout Ratio (%)Debt/Eqty. (%)P/EEarns. Mom. (%)52W Ttl. Rtn. (%)Recent Price ($)
Loblaw Cos. Ltd.L-T21.7-0.092.144.9150.912.91.2-10.262.58
Fortis Inc.FTS-T23.90.073.974.5132.818.32.8-8.451.50
Hydro One Ltd.H-T17.20.183.532.5128.918.94.62.028.82
Emera Inc.EMA-T13.10.204.969.9183.517.86.7-8.252.00
Algonquin Power & Util.AQN-T13.40.283.570.9101.523.81.57.522.48
George Weston Ltd.WN-T14.80.292.330.3278.212.5-2.8-10.396.90
Quebecor Inc.QBR-B-T8.00.312.532.3642.112.51.31.432.51
Rogers CommunicationsRCI-B-T29.30.323.579.3222.115.2-0.3-9.557.50
Maple Leaf Foods Inc.MFI-T3.00.332.673.140.120.819.7-5.424.33
North West Co. Inc.NWC-T1.60.434.338.9132.913.916.525.833.38
Shaw CommunicationsSJR-B-T11.60.445.289.596.616.50.0-8.122.60
Leon's Furniture Ltd.LNF-T1.70.493.029.660.812.812.735.021.08
Northland Power Inc.NPI-T10.00.542.462.8684.629.5-0.461.349.22
Evertz Technologies Ltd.ET-T1.00.685.385.110.217.41.4-20.713.49
Intact Financial Corp.IFC-T21.30.702.245.536.415.712.50.1149.24
TC Energy Corp.TRP-T53.20.755.783.1162.213.7-2.2-19.756.59
Capital Power Corp.CPX-T4.00.755.578.4114.818.54.55.337.60
TMX Group Ltd.X-T7.20.752.255.127.919.82.112.2128.68
Royal Bank of CanadaRY-T151.10.784.154.7367.811.90.62.6106.20
Atco Ltd.ACO-X-T4.40.834.672.7238.413.2-5.9-25.738.58
Toronto-Dominion BankTD-T136.00.854.248.4252.812.50.25.375.42
Great-West Lifeco Inc.GWO-T28.90.855.655.239.89.90.0-4.531.10
Bank of Nova ScotiaBNS-T86.00.875.166.3277.711.1-6.51.071.01

Source: Refinitiv Eikon & Wickham Investment Counsel Inc. 

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

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