The quantitative strategy team at Scotiabank asked the company’s analysts across the world for top equity income ideas for what has been a difficult environment for dividend stocks,
“Both U.S. and Canadian dividend strategies are performing poorly this year, for the most part underperforming their respective equity benchmarks. The steep rise in interest rates and bond yields has eroded the competitiveness of dividend-paying stocks … Over the long run, dividends matter a lot, accounting for the lion’s share of equity returns. As such, we highlight Scotiabank GBM’s top equity income ideas, asking our team to provide stocks that meet the following criteria - Stocks that boast a competitive dividend yield, given the elevated interest rate environment; not necessarily a stock with a dividend yield higher than bond yields, but one with a dividend yield greater than 3.0 per cent. Conviction that the dividend per share could be bumped next year (or at least sustained), and where the dividend per share increase is supported by fundamentals (i.e., where earnings per share/free cash flow growth is strong enough)”
The Canadian stocks on the list are Brookfield Asset Management, Canadian Natural Resources, DRI Healthcare Trust, Endeavour Mining, Exchange Income Corp., Granite REIT, Labrador Iron Ore Royalty Corp., Manulife Financial Corp., Maple Leaf Foods, Northland Power, Parkland Corp., Power Corp. of Canada, Russel Metals Inc., TC Energy Corp., Telus Corp., and Topaz Energy Corp. The international names are Aguas Andinas, Ambev SA, Banco do Brasil, Brixmor Property Group, Enterprise Products Partners LP, Kimberley-Clark de Mexico, Neoenergia SA, Terrafina, TIM SA, UDR Inc., Vale, Walmex and WEC Energy Group Inc.