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January 23, 2021

Canadian Dividend All-Stars – Week of Jan 25

Disclaimer: The writer of this article may have positions in the securities mentioned in this article. The fact they hold positions in securities has had no impact on the production of this article

By Mathieu Litalien

January 23, 2021

The pace of dividend growth is expected to ramp up as February is one of the busiest months of the year for dividend raise announcements.

The end of January should also bring welcomed news as there are few Canadian Dividend All Starts poised to raise dividends.

Of note, all figures are in Canadian dollars unless otherwise noted.

Recent dividend updates

First, let’s take a look at the action from the past couple of weeks for some popular Canadian dividend stocks

In the last update, we expected two of the most reliable dividend growth stocks on the TSX Index - Canadian Utilities (TSX:CUand Atco Ltd. (TSX:ACO.X) – to come through for investors

Although they did, the pace of dividend growth was disappointing.

Company

EST DGR

EST Increase

Actual DGR

Actual Increase

New Div

Canadian Utilities

~3-5%

$0.0131-0.0218

1.01%

$0.0044

$0.4398

Atco

~5%

$0.0248

3.01%

$0.0131

$0.4483

Let’s start with Canadian Utilities which owns the longest dividend growth streak in Canada.

As warned, the company has been mired in a state of negative earnings and slowing dividend growth. The latter continued as CU announced a paltry 1% raise.

It was a token raise that effectively extends the company’s dividend growth streak as it aims to become the first Dividend King north of the border.

Parent company Atco is also seeing the pace of dividend growth slow materially. The 3% raise was the lowest in history and less than half the 7.5% it had raised in the past couple of years.

While it was a positive both companies raised, it certainly wasn’t the hot start dividend growth investors were looking for.

Upcoming dividend raises, cuts or suspensions

Canadian National Railway (TSX:CNR)  

  • Current Streak: 25 years
  • Current Yield: 1.65%
  • Earnings: Tuesday, January 26

What can investors expect:

CN Rail is not only Canada's largest railway, it is also one of the most reliable dividend growth stocks in the country. It owns the tenth longest streak in the country and typically raises the dividend at the end of January.

CN Rail's yield won’t turn heads and unfortunately, the pace of dividend growth is beginning to slow.

After averaging double-digit growth over the past number of years, last year’s 7% raise was well below its average.

Will that trend continue in 2021? Considering we are still in the midst of a pandemic, it would not surprise me if CN Rail announced a raise in the mid-single digits.

The company still generates strong earnings and cash flow, and on a forward basis CN Rail’s payout ratio accounts for only 39% of earnings. It has plenty of room for growth, but it will depend on how conservative the company chooses to be in light of the current pandemic.

EST DGR

EST Increase

New Div

~7%

$0.04

$0.615

Metro (TSX:MRU)  

  • Current Streak: 26 years
  • Current Yield: 1.55%
  • Earnings: Tuesday, January 26

What can investors expect:

January’s announcements always feature some of the best dividend growth stocks in the country and Metro is no exception.

It has a 27-year streak and is tied for seventh longest streak in Canada, up there with many popular Canadian pipelines and utility companies. Much like CN Rail, it has consistently raised along with first quarter results.

Not only is Metro's dividend growth streak consistent, but so too is the company's dividend growth rate. Over the past 10 years, it has reliably raised the dividends by double digits.

Given Metro's low payout ratio (28%), the only headwind preventing the company from raising inline with historical averages is the current pandemic.  

EST DGR

EST Increase

New Div

11.11%

$0.025

$0.25


* Mat Litalien is long Canadian National Railway. Follow me on Twitter @matlitalien to get my latest updates on Canadian dividend stocks.

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Mathieu Litalien


Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha, Motley Fool and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.

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