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What are we looking for?

Sustainable dividends from tech firms eager and able to pick up Huawei’s lost 5G markets.

The screen

Canada continues to grapple with fallout from its arrest of Huawei executive Meng Wanzhou. Moreover, it must decide whether to ban the tech giant’s 5G equipment over fears that it poses security risks because of the company’s close ties to the Chinese government.

Banning Huawei would likely boost costs for Canadian telecom providers – as it has in the United States, Australia and New Zealand. Those “Five Eyes” intelligence-sharing partners have already blocked low-bidder Huawei. If the remaining partners, Canada and Britain, follow their lead, that would only further open up opportunities for Huawei competitors.

From an extensive list of tech leaders, we singled out dividend-payers already on the leading edge of next-generation 5G, which harnesses speeds 10 to 20 times faster than the current LTE (long-term evolution, or 4G) networks. We then applied our TSI Dividend Sustainability Rating System. It 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. Huawei’s main rivals – most notably Sweden’s Ericsson, Finland’s Nokia Corp. and the U.S.-based Cisco Systems Inc. and Juniper Networks Inc. – should be able to substantially boost their respective market shares. Meanwhile, fibre-optic leader Corning Inc. and dominant chip-maker Intel Corp. are at the forefront of providing the technology to link up and control 5G traffic.

Seeking dividend payers keen to supply 5G technology

Ranking* Company Ticker Dividend Sustainability Rating Points Div. Yield % Market cap (US$Bil) Recent Price (US$) 1Yr Total Return (%)
1 Cisco Systems Inc. CSCO-Q Above Average 9 3.1 209.9 43.32 9.2
2 Intel Corp. INTC-Q Above Average 8 2.5 223.3 48.01 10.1
3 Corning Inc. GLW-N Above Average 8 2.4 23.6 29.68 -11.8
4 Nokia Corp. (ADR) NOK-N Above Average 7 3.6 34.7 6.21 26.7
5 Juniper Networks Inc. JNPR-N Average 6 2.6 9.6 28.15 -1.7
6 Ericsson (ADR) ERIC-Q Average 6 1.3 29.9 9.18 35.6

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. 

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

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