For a few years now, I’ve been a fan of and investor in Canadian dividend paying stocks. Although dividend investing is not without some risks, I believe (long-term) that holding a diverse basket of Canadian companies that consistently rewards shareholders via dividend payments can be a healthy way to grow your portfolio. Readers of the TSI Network feel the same. The Successful Investor newsletter routinely covers some analysis for Canadian stocks for long-term investment plays.
For today’s post, I thought I would highlight some of the stocks I found in The Successful Investor newsletter, and provide my own commentary on them.
TELUS CORP. $40 price as of December 2015 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; www.telus.com)
Telus plans to launch several new cloud computing services that will use Microsoft’s cloud software and Internet equipment from Cisco Systems. The company aims to work closely with its clients to develop cloud-based systems that are secure, fast and easily expandable. More businesses are shifting to a cloud platform, as it lets them avoid the high cost of buying new computers and continuously updating software. Over the next five years, companies are forecasted to spend up to eight times more on cloud services than non-cloud technologies. Telus is a buy.
My Own Advisor: I’ve owned Telus for many years and I reinvest all dividends paid every quarter to buy more shares commission-free. Telus tends to raise their dividends every year, and in recent years, they have raised their dividend a couple of times per year. I believe another dividend hike is coming in 2016. Long Telus.
TRANSCANADA CORP. $44 price as of January 2016 (Toronto symbol TRP; Conservative Growth and Income Portfolios, Utilities sector; www.transcanada.com)
TransCanada has several smaller projects to focus on after the U.S. government’s rejection of its proposed Keystone XL pipeline. Their biggest project is Energy East, which would ship oil from Alberta to refineries in Eastern Canada. TransCanada recently modified the route to avoid environmentally sensitive areas, which will increase the project’s cost by 30.8%, to $15.7 billion. If approved, Energy East could start up as soon as 2020. TransCanada is also building other pipelines and upgrading its power plants. It plans to spend $13 billion on these projects by the end of 2018. These investments will allow the company raise its dividend by 8% to 10% each year through 2020, they have already told shareholders this is their plan. TransCanada is a buy.
My Own Advisor: I’ve owned TransCanada for many years and I reinvest all dividends paid every quarter to buy more shares commission-free. Even without Keystone XL, given TRP’s commitment to dividends, I believe another dividend hike is coming in 2016. Long TransCanada.
ANDREW PELLER LTD. $20 price as of January 2016 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; www.andrewpeller.com)
Andrew Peller Ltd. is Canada’s second-largest wine producer, after Constellation Brands. In the second quarter of its 2016 fiscal year, which ended September 30, 2015, the company’s sales rose 2.9%, to $85.2 million from $82.8 million a year earlier. Earnings jumped 41.7%, to $0.51 a share from $0.36. Andrew Peller is a buy.
My Own Advisor: I do not own this company (yet) and I would need to do more research to see if this stock meets my long-term investing objectives.
FORTIS INC. $36 price as of December 2015 (Toronto symbol FTS; Conservative Growth and Income Portfolios, Utilities sector; www.fortisinc.com)
Fortis has agreed to buy Chevron Corp.’s 93.8% stake in the Aitken Creek underground gas storage facility in northeastern B.C.; BP Canada owns the remaining 6.2%. Fortis will pay $266 million U.S. when it completes the purchase in early 2016. To put that in context, the company earned $145 million (Canadian), or $0.52 a share, in the third quarter of 2015. Fortis currently leases one-third of Aitken Creek’s capacity, so the purchase should lower its costs. Fortis is a buy.
My Own Advisor: I’ve owned Fortis for many years and I reinvest all dividends paid every quarter to buy more shares commission-free. I believe Fortis can and will continue to deliver the energy we use every day, as such, it is a staple in my portfolio. Fortis has an excellent history of growing its dividend, one of the best Canadian dividend growers there is. Long Fortis.
BANK OF MONTREAL. $79.70 price as of December 2015 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Financial sector; www.bmo.com)
For BMO fiscal 2015 fourth quarter, which ended October 31, 2015, the bank’s revenue rose 7.4%, to $5.0 billion from $4.6 billion a year earlier. Overall earnings improved 13.8%, to $1.3 billion from $1.1 billion, while earnings per share gained 16.6%, to $1.90 from $1.63, on fewer shares outstanding. These figures exclude unusual items, such as costs to integrate recent acquisitions. On that basis, the latest earnings easily beat the consensus forecast of $1.74 a share. Earnings from Canadian retail banking (45% of the total) rose 6.5% as low interest rates spurred loan demand and credit card spending. Higher fee income also contributed to the gain. The U.S. retail banking division (13%) reported a 3.1% profit increase, mainly because it set aside less money to cover potential bad loans.
The bank’s overall loan-loss provisions fell 24.7%, to $128 million from $170 million a year earlier. It set aside less money for potential bad loans at its Canadian retail banking division and sold some of its bad corporate loans. The strong results prompted the bank to raise its quarterly dividend by 2.4%, to $0.84 a share from $0.82 in late-2015; dividend payable this month.
My Own Advisor: I’ve owned BMO and other Canadian banks for years and I reinvest all dividends paid from Canadian banks every quarter to buy more shares commission-free. I believe BMO, along with other big Canadian banks, will survive and then thrive after this current market downturn is over. BMO has been paying dividends since the 1800s. My bet is they will continue to do for the foreseeable future. Long BMO.
If you want more research like this, consider this special offer to My Own Advisor readers courtesy of the TSI Network.
Readers who subscribe to The Successful Investor newsletter will benefit from the following:
- Investing advice and updated reports on up to 20 stocks that TSI has identified as having the greatest potential to reward investors with capital gains and dividends—in every monthly issue.
- Suggestions regarding when to buy, hold or even sell stocks – based on three portfolio risk profiles – Conservative Growth, Aggressive Growth and Income-Seeking Investors.
- There is an unlimited library to browse with all the back issues of The Successful Investor —at no extra cost whatsoever.
- Last but not least, you will receive the just released Canadian Stocks of the Year for 2016.
Thanks for reading.
Disclaimer: My Own Advisor owns some of these companies above but these are not recommendations by My Own Advisor for purchase. I am responsible for all my investing decisions, so are you. This article represents my opinion only. I am not a financial advisor. I encourage you to consult with a financial professional, such as fee-only-planner, before you make any major investment decisions. Refer to my disclaimer & privacy page for more details.
This was a good article, but to me, what was missing is the dividend yields, dividend growth rate history, and future dividend growth potential, although the latter item was somewhat mentioned in the text where reference was made to future growth potential.
Perhaps a future column can focus on the top dividend stars in the Canadian All-Stars list.
FTS is down almost 10% today, I had been keeping an eye on it for awhile and pulled the trigger on a small purchase today. Hoping to increase it in the future.
I have been moving out of any remaining mutual funds that I bought over the years and many of these shares are in my recent purchases. Like others have said, Peller has not been in my list.
I have also held bank shares for some time and enjoy the dividends but I must admit to being concerned about how much my holdings are weighted towards the financial sector.
I know I’m trying to diversify out of Canada, and that includes financials. I’ve been doing that (more diversification) for about 1-2 years now and will continue to do so going forward.
I bought some Wells Fargo shares a few years ago. The exchange rate has made them an attractive investment and the dividend is not to be sneezed at either.
Good call Richard. I own a few shares as well.
ADW.A has only paid a dividend since 2007 and it’s growth record has not been stellar.
Div Growth:
2008 14.48%
2009 0.0%
2010 0.0%
2011 6.82%
2012 2.13%
2013 5.56%
2014 9.21%
Improving but I prefer those companies that have a much longer dividend history, as the other three.
Thanks cannew. I’m not sure I would buy ADW.A right now but I have been thinking about it, I would need to figure out if such a company aligns with my long-term investing objectives.
Meant the other Four. If one looks at ADW’s price chart it’s only growth the last 2 years, much too short a time. I like the Slow & Steady and as mentioned before there are only about 25 stocks which I would consider and ignore all the rest. Buy the best, not the most!
Mr Buffett on risk and six of his investment ideas, focus investing, concentrated portfolios, Hagstron’s The Warren Buffett Portfolio, non-aristocratic dividend stocks. Safety is in quality, not numbers of stocks.
As you know cannew, I’m a fan of aristocrats with proven histories.
Nice – 4/5 of those are either on my watch list or I already own. What are your thoughts on CN Rail? I just started watching it recently, it never hit my radar before due to the low yield but the earnings and past dividend history is very impressive. That, and they essentially have a monopoly on transport in most of Canada
Yes, I own many of these companies and I try to DRIP all of them. I own CN Rail and would like to buy more non-registered. A few hundred shares eventually will be nice! I simply don’t have any money now 🙁