The Canadian dividend stocks we’ve identified could see an increase in payouts to shareholders within the next year
SmallCapPower | May 3, 2019: Dividend paying stocks can generate income for investors without having to sell shares. Additionally, dividend increases are generally a good indictor that companies are growing their free cash flow and are more likely to have better returns than their peers with stagnant dividend payouts. Dividend increases occur primarily due to two main reasons. First, could be an increase in the company’s profits, where more funds can be allocated to dividend payouts. Second, a company may decide to move away from an M&A strategy, and as a result should have increased profitability, which is later paid out as dividends. Today we have discovered four Canadian dividend stocks trading on the TSX that have the potential to increase their dividend payout in the next year. For reference, the four selected stocks were chosen from a sample size of 57 companies trading on the TSX with a market capitalization under $5 billion, the average dividend yield of our sample is 5.9%.
*Share prices as at close May 1, 2019, data obtained from S&P Capital IQ
*Dividend per share displayed as annual amount
Intertape Polymer Group Inc. (TSX:ITP) – $18.73
Containers and Packaging
Intertape Polymer Group operates in the packaging industry in Canada, the U.S., and internationally. The Company develops, manufactures, and sells a variety of paper and film-based pressure sensitive and water activated tapes, packaging film, woven coated fabrics, and complementary packaging systems. Its products consist of carton sealing tapes, industrial tapes (which include masking, duct, and electrical tapes), shrink film, stretch wrap, lumberwrap, structure fabrics, and geomembrane fabrics. Intertape Polymer Group’s expected success with upcoming growth projects, as well as synergies from their acquisition of Polyair (a protective packaging company) are expected to deliver strong EBITDA growth for F2019E and F2020E, which is currently $227.5 million and $246.8 million, respectively, based on consensus estimates. Rising future profits could lead to an increased dividend payout.
- Market Cap: $1.1 Billion
- YTD Return: 9%
- Dividend Yield: 4.0%
- Dividend per Share: $0.56
- Payout Ratio: 70.89%
Northland Power Inc. (TSX:NPI) – $23.78
Utilities
Northland Power is an independent power producer that develops, builds, owns, and operates green power projects primarily in Canada and Europe. The Company generates electricity, using renewable sources such as wind, solar, and hydro electric power. The business segments that Northland generates revenues from include Thermal, Renewable, Operations Services, and Offshore Wind. The Company has quality financials, which are a product of their strong cash-flow generation. NPI is also noted for its low market and operational risk, due largely to its low information risk (the risk that information circulated by a company will misleads investors). This results in a company that has realized stable growth over time, as well as steady increased dividend payments.
- Market Cap: $4.23 Billion
- YTD Return: 9.4%
- Dividend Yield: 5.1%
- Dividend Per Share (annual): $1.20
Rogers Sugar Inc. (TSX:RSI) – $6.15
Packaged Foods and Meats
Rogers Sugar engages in refining, packaging, and marketing sugar & maple products. The Company offers granulated, plantation raw, brown, organic, icing, maple, stevia, smart sweetener blend, and coconut sugar. RSI also offers syrups, jam & jelly mixes, iced tea mixes, and hot chocolate mixes. Roger Sugar markets its products to wholesalers, restaurants, and end users, under the Lantic name in Canada, the U.S, and globally. Rogers Sugar revenues increased 18% year-over-year and has 13% EBITDA margins. Rogers Sugar has below-average operational risk, as a result of low information risk and below average market risk.
- Market Cap: $645.8 Million
- YTD Return: 14.1%
- Dividend Yield: 5.9%
- Dividend per Share: $0.36
AG Growth International Inc. (TSX:AFN) – $58.60
Agriculture and Farm Machinery
AG Growth International manufactures and distributes grain handling, storage, and conditioning equipment in Canada, the U.S., and internationally. The Company offers portable handling equipment, that includes augers, belt conveyors, and storm seed treaters. AFN also manufactures and distributes permanent handling equipment. In addition, the Company offers storage and conditioning equipment, such as storage bins, temporary storage, aeration, dust collection systems, heaters, petroleum & water storage systems, and bin monitoring systems. Research has shown that the change in earnings per share growth is an important factor that drives stock-price performance. AG Growth’s EPS has grown at a 14% CAGR over the past five quarters and has consistently outperformed consensus estimates. This trend is likely to result in increase future dividend payments.
- Market Cap: $1.09 Billion
- YTD Return: 24.3%
- Dividend Yield: 4.1%
- Dividend per Share: $2.40
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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