What are we looking for?
Growing Canadian mid-cap stocks that also distribute their profits.
Investors can be doubly rewarded by companies that can distribute a part of their net income to shareholders without penalizing growth. The reason could be that the company is able to grow organically without too much capital, with only time needed to build an incredible company. Mid-caps can offer the best of both worlds: enough stability to distribute dividends while having higher growth potential than large caps.
The screen
We screened Canadian stocks focusing on the following criteria:
- Market capitalization between $2-billion and $5-billion;
- Three-year dividend growth rate higher than 5 per cent – and this is how our table is ranked;
- Five-year average return on capital higher than 10 per cent – we want companies that can sustain their dividends with robust profitability;
- Two-year cumulative growth in net operating profit after tax (NOPAT) higher than 5 per cent – we want companies able to grow their business while distributing a dividend.
For informational purposes, we have also included dividend payout ratio, five-year annual sales growth rate, price-to-earnings ratio, one-year price return and dividend yield. Please note that some ratios may be shown as of end of previous quarter.
More about Inovestor
Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports.
What we found
Best of both worlds: Growing mid-cap stocks with sustainable dividends
| COMPANY | TICKER | MKT. CAP. ($ MIL.) | 3Y DIV. GRTH. RATE (%) | 5Y ROC (%) | 2Y NOPAT GRTH. (%) | DIV. PAYOUT (%) | 5Y SALES GRTH. (%) | P/E |
| Labrador Iron Ore Royalty | LIF-T | 2,401.9 | 88.1 | 17.0 | 63.2 | 102.0 | 18.9 | 6.4 |
| Goeasy Ltd. | GSY-T | 2,521.4 | 41.6 | 26.9 | 231.6 | 15.5 | 18.5 | 10.3 |
| Enghouse Systems Ltd. | ENGH-T | 2,471.0 | 21.1 | 18.9 | 31.9 | 38.2 | 10.3 | 26.8 |
| Stelco Holdings Inc.* | STLC-T | 2,475.6 | 20.5 | 41.5 | 734.9 | 5.7 | 24.5 | 2.6 |
| Stella-Jones Inc. | SJ-T | 2,575.6 | 14.5 | 11.8 | 33.5 | 19.7 | 10.3 | 10.9 |
| E-L Financial Corp. Ltd. | ELF-T | 3,388.3 | 14.5 | 11.7 | 454.2 | 2.0 | 2.5 | 2.7 |
| Equitable Group Inc. | EQB-T | 2,394.0 | 12.1 | 16.4 | 48.8 | 9.0 | 12.7 | 8.6 |
| First National Fin'l Corp. | FN-T | 2,576.8 | 5.8 | 41.3 | 38.2 | 60.0 | 10.5 | 11.8 |
| Canadian Western Bank | CWB-T | 3,455.8 | 5.1 | 12.2 | 24.6 | 31.0 | 7.2 | 10.4 |
Source: Inovestor