We made the list. GLTA
Eighteen dividend payers that show promising value and safety
IGM.TSX, REI.UN.TSX, CIX.TSX, HR.UN.TSX, SRU.UN.TSX, REF.UN.TSX, BOX.UN.TSX, ENF.TSX, CUF.UN.TSX, AP.UN.TSX, MIC.TSX, GRT.UN.TSX, CWB.TSX, CPX.TSX, TA.TSX, ET.TSX, FN.TSX, MST.UN.TSX
What are we looking for?
As a follow up to our previous Number Cruncher, my associate Allan Meyer and I take a closer look at Canadian dividend payers using our investment philosophy focused on safety and value.
The screen
We started with Canadian-listed equities with a market capitalization between $1-billion and $10-billion. (Last time, we looked at those with a market cap exceeding $10-billion.) Some investors, such as Allan and myself, love income. We like to get paid while we wait and dividends generally reflect safety and stability.
• Yield is based on the share price divided by the projected dividend payments over the next year. All securities listed in this screen yield 4.5 per cent or more.
• Payout is the dividend payment divided by earnings. A lower number is preferred and implies the dividend is safer. It could also signal the ability for a future dividend increase, while a number more than 100 could signal the potential for a cut. We've capped the payout at 100.
• Price-to-earnings ratio is the share price divided by the earnings per share. As a valuation metric, the lower the number, the better the value.
• Earnings momentum is the change in annual earnings over the past quarter. A positive number indicates earnings are increasing; the opposite is true for a decrease. Increases could foreshadow a future dividend bump and vice versa for decreases.
• Debt to equity: A smaller ratio indicates lower levels of debt and can be viewed as a sign of safety. A number lower than 100 implies a company has enough equity to pay its debt obligations.
It is important to note that metrics and their implications can vary widely across industries and sectors.
What did we find?
Real estate investment trusts dominate the list with their high yields and attractive value. H&R looks appealing for its high yield, low payout, attractive value and positive earnings momentum. Mortgage insurer Genworth Canada also looks interesting as it scores well on all metrics.
Alternatively, an exchange-traded fund could be a way to play the REIT sector without exposure to individual security risk. BMO and First Asset offer options, tickers ZRE and RIT, respectively.
Investors should contact an investment professional or conduct further research before buying any of the securities listed here.
Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.