Today we have discovered some TSX dividend stocks that have the potential to increase their dividend payout in 2019
SmallCapPower | March 11, 2019: Today we’ve identified four TSX dividend stocks that could increase their payout this year. This could be a good indicator for companies that have growing businesses and that are more likely to have better returns than their peers with stagnant dividend payouts over the medium to long term. For reference, dividend per share increases typically occur for two main reasons. One is due to an increase in the company’s net profits where the funds for issuing dividends are derived. Secondly is when companies decide to move away from a strategy of growth and expansion, and as a result have more profit returned to equity, which is later given out in dividends. This change in strategy can occur for many reasons, such as concerns about increasing production sufficiently to meet demands and unfavorable financing rates. A key indicator to look at is the Payout Ratio. This ratio is shown as a percentage how much a company’s earnings are paid out to investors. The ratio can be calculated by dividing dividend per share by EPS; we have utilized last twelve months (LTM), EPS and dividends for our calculations. The following companies have been selected from a sample of 102 TSX-listed companies, with markets caps under $5B. For reference the average payout ratio of our sample size was 38.7%.
*Share prices as at close March 7, 2019, data obtained from S&P Capital IQ
Russel Metals Inc. (TSX:RUS) – $23.89
Metal Distribution
Russel Metals controls one of the largest distributions and processing network of metals in North America. Of its $3.3B in consolidated revenues in 2018, ~70% was attributed to Canadian operations and 30% was from its United States operations. The Company focuses on three major business segments, which include metals service centers; energy products and steel distributors. Its last increase in dividends per share occurred in 2014, but since then it has remained stable at $1.56. In early 2018, Russel Metals announced it formed an agreement to acquire the operating assets and facilities of DuBose Steel. DuBose Steel’s value-added processing capabilities and locations will allow Russel Metals to expand further into the United States.
- Market Cap: $1,483.8 Million
- Dividend Yield: 6.5%
- Dividend Per Share (LTM): $1.52
- EPS (LTM): $3.53
- Payout Ratio: 43.1%
Cogeco Communications Inc. (TSX:CCA) – $85.01
Cable and Satellite
Cogeco Communications is a communication corporation that is considered within North America as the 8th largest cable operator. Cogeco Communications operates in three main segments, which include: Canadian broadband services, American broadband services and Business information and communication technology services.
- Market Cap: $4,198.1 Million
- Dividend Yield: 2.5%
- Dividend Per Share (LTM): $1.95
- EPS (LTM): $6.91
- Payout Ratio: 28.2%
Domtar Corporation (TSX:UFS) – $67.38
Pulp and Paper Products
Domtar Corporation focuses on designing, manufacturing and distributing numerous fiber-based products such as communication, speciality and packaging paper as well as absorbent hygiene products. The Company’s main segments include Pulp and Paper and Personal Care. A few of Domtar’s major trademarks are Lync Opaque Ultra, Husky Opaque Offset and Nova thin. Domtar is also expanding to focus on CelluForce, which operates at Domtar’s Windsor Mill, and focuses on discovering applications for cellulose nanocrystals to help improve environmental sustainability.
- Market Cap: $4,230.2 Million
- Dividend Yield: 3.6%
- Dividend Per Share (LTM): $2.37
- EPS (LTM): $6.14
- Payout Ratio: 38.6%
Maple Leaf Foods Inc. (TSX:MFI) – $27.51
Packaged Foods and Meats
Maple Leaf Foods is a consumer-packaged food processing company located in Canada, the United States, the United Kingdom, Asia and Mexico. Maple Leaf operates in main three segments, which include the Meat Products Group, the Agribusiness Group and the Bakery Products Group. The main markets the Company relies on are major grocery stores, independent grocery outlets and retail and wholesale buying groups. In Q1/2019, the Company increased its quarterly dividend per share by 11.5%. The Company’s F2018A revenue is $893.9M. On November 26, 2018, Maple Leaf announced a $605.5M investment in a poultry facility to help meet the increasing demand for value-added poultry.
- Market Cap: $3,396 Million
- Dividend Yield: 2.1%
- Dividend Per Share (LTM): $0.52
- EPS (LTM): $0.81
- Payout ratio: 64.1%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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