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What are we looking for?

Canadian dividend yields of 6 per cent or more, and yet are highly sustainable during and after the current market downturn.

The screen

The S&P/TSX Composite Index is down roughly 14 per cent since the start of this year, and that has lowered the prices of some very high-quality Canadian stocks. And at the same time, it has pushed some of their yields over 6 per cent.

Investors like high-paying dividend stocks as a source of income – and a yield of 6 per cent or more is highly attractive. Still, it’s folly to focus solely on above average yields.

That’s because a high yield may signal danger rather than a bargain if it reflects widespread investor skepticism about the company’s ability to keep paying its current dividend. Any resulting dividend cut always undermines investor confidence and can quickly push down the share price.

We started this search with an extensive list of dividend-paying Canadian companies, before singling out those offering yields at or above 6 per cent. We then applied our TSI Dividend Sustainability Rating System to home in on high yields that are a plus rather than a danger sign. Our 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 to cover dividends;
  • 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, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)
1Enbridge Inc.ENB-THighest116.6104,196.1
2TC Energy Corp.TRP-THighest116.258,348.0
3Algonquin Power & Utilities Corp.AQN-TAbove Average96.210,872.2
4Bank of Nova ScotiaBNS-TAbove Average96.279,533.3
5Pembina Pipeline Corp.PPL-TAbove Average96.123,414.0
6Manulife Financial Corp.MFC-TAbove Average96.040,778.4
7Keyera Corp.KEY-TAbove Average86.76,186.3
8Power CorporationPOW-TAbove Average86.321,776.2
9TransAlta Renewables Inc.RNW-TAbove Average86.24,065.0
10Bridgemarq Real Estate Services Inc.BRE-TAbove Average79.9125.0

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.

Our TSI Dividend Sustainability Rating System generated 10 stocks: Toronto-based Bridgemarq Real Estate Services Inc. (formerly Brookfield Real Estate Services) provides services to residential real estate brokers and a network of more than 18,000 realtors. It operates in Canada under the Royal LePage, Via Capitale and Johnston & Daniel brands. Manulife Financial Corp., headquartered in Toronto, is among Canada’s leading life insurers, with expanding interest in Asia. Montreal-headquartered holding company Power Corp. of Canada has controlling stakes in both Great-West Lifeco and IGM Financial Inc. The latter is Canada’s largest independent mutual-fund provider. Toronto-based Bank of Nova Scotia is the country’s fourth-largest bank by market capitalization. Algonquin Power & Utilities Corp., headquartered in Oakville, Ont., and TransAlta Renewables Inc., headquartered in Calgary, are major Canadian producers of renewable energy. Pipeline operators TC Energy Corp. and Enbridge Inc., both based in Calgary, have strong cash flow and growth projects to keep dividends rising. Calgary-based Pembina Pipeline Corp. operates pipelines and more in Canada and the United States, while Keyera Corp., also based in Calgary, is one of our largest mid-stream oil and gas operators.

Photo by Arturo Castaneyra on Unsplash

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