The Canadian dividend stocks we’ve discovered all have modest payout ratios, positioning these companies to continue to increase dividends paid to shareholders in the future
SmallCapPower | December 11, 2018: Dividend-paying stocks appeal to income-oriented investors who prefer a predictable stream of cash flows provided by dividend payments. These stocks may be especially attractive today given the current market volatility. As equity markets face a high degree of uncertainty in response to several geopolitical events, including trade war worries and slowing global economic growth, investor interest in dividend-paying stocks should expand, especially due to higher yield opportunities driven by weak stock prices. The Canadian dividend stocks we’ve identified have payout ratios under 30%, providing a margin of safety and the potential for future dividend increases. As such, investors looking to seek shelter from further volatility may be interested in the three Canadian dividend stocks on our list today. For reference, the payout ratio is calculated by dividing the dividends paid by net income. This ratio gives investors an idea of the sustainability and room for future growth for the Company’s dividend.
*Market Cap and share prices as of December 7, 2018. Dividend Yield (latest filing) and Payout Ratio (LTM) obtained from Capital IQ.
Cogeco Communications Inc. (TSX:CCA) – $67.02
Cable and Satellite
Cogeco is a Canada-based telecom company operating in Ontario, Quebec, and the East Coast. The Company offers cable, Internet and telephone services via its Cogeco and Atlantic Broadband brands. Cogeco also operates Cogeco Media, a Quebec-based radio company with the leading share in hours listened in Montreal and Quebec City. The Company’s low beta can be attributed to Internet and cable services being less discretionary than other services, such as Netflix subscriptions. As such, during economic downturns and market volatility, Cogeco’s services are unlikely to be canceled by customers, ensuring the Company can continue to pay its dividend. On November 27, 2018, the Company announced the completion of its acquisition of 10 radio stations from RNC Media Inc., expanding Cogeco’s network of radio stations to 22 across Ontario and Quebec.
- Market Cap: $2.3 Billion
- YTD Returns: -31.1%
- Dividend Yield: 2.8%
- Payout Ratio: 20.4%
Magellan Aerospace Corporation (TSX:MAL) – $15.46
Aerospace
Magellan Aerospace designs and manufactures aerospace components for corporate and military clients throughout the globe. These products include aeroengines, aerostructures, gas turbines for power plants, helicopter safety systems, as well as rocket systems for military use. On October 15, 2018, the Company announced it had obtained a license to manufacture A20X advanced aluminum cast parts, which are used for aerospace and defense purposes by major OEMs. On November 5, 2018, Magellan announced it had been awarded a six-year contract with Airbus for the manufacturing of certain aircraft parts in a contract worth over $140 million. Long-term contracts such as these help lock in cash flows and play an essential role in ensuring a stable dividend policy for the Company.
- Market Cap: $900.0 Million
- YTD Returns: -24.3%
- Dividend Yield: 2.6%
- Payout Ratio: 21.2%
Canadian Tire Corporation, Ltd. (TSX:CTC.A) – $144.90
Retail
Canadian Tire Corporation provides a range of retail goods and services for the Canadian consumer market. The Company operates through three divisions: Retail Canadian Tire (CT) REIT, and Financial Services. The Retail segment focuses on general merchandise including sporting equipment, auto products and petroleum; the REIT segment operates a real estate investment portfolio comprised of CT stores and distribution centers; and Financial Services business markets CT credit cards, warranties and insurance products. On November 8, 2018, the Company announced strong Q3/2018 financial results with retail sales climbing 2.6% on an annual basis, prompting the Company to increase its annual dividend by 15.3% from $3.60 to $4.15 per share.
- Market Cap: $8.8 Billion
- YTD Returns: -11.8%
- Dividend Yield: 2.9%
- Payout Ratio: 29.3%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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