Canadian Dividend All-Stars – Week of Mar 8

Posted on March 8, 2021 by Mathieu Litalien

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed below. Stocktrades Ltd may also be compensated via affiliate links in the post below.

As we head into mid-March the pace of dividend growth is about to slow to a crawl. Late March to May is one of the slowest periods for dividend growth announcements. That being said, we still have a few raises to look forward to this coming week.

Before we jump into that, let’s first take a look at the Canadian dividend stocks action from last week.

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

Recent dividend updates

It was yet another mixed week as two of the three Canadian Dividend All Stars expected to raise dividends did so. Coming through for investors were Canadian Natural Resources (TSX:CNQ) and Parkland Fuel (TSX:PKI).

Keeping the distribution steady was Chartwell Retirement REIT (TSX:CSH.UN). As we discussed last week, a raise from Chartwell was doubtful. Considering the “COVID-19 pandemic has had a profound impact” on the company, it was not all that surprising.


We also recently looked at Toromont (TSX:TIH) and the company's dividend.

Company

EST DGR

EST Increase

Actual DGR

Actual Increase

New Div

CNQ

5.88%

$0.025

10.59%

$0.045

$0.47

PKI

~2%

$0.03

1.68%

$0.0204

$1.2348





Let’s start with Canadian Natural raising the dividend by 10.6%, which was slightly above expectations. The company extends its dividend growth streak to 21 years.

Here at Stocktrades, we’ve been steadfast in our opinion that Canadian Natural is simply one of the best oil stocks in the country. The company’s strong raise is once again a testament to it being best-in-class. Despite a highly volatile environment, this low cost producer still generates considerable cash flows.

Turning our attention to Parkland, the 1.8% dividend raise is inline with expectations. Parkland isn’t going to excite investors with high dividend growth – it never has. Since the company’s nine-year dividend growth streak began, the dividend raise has averaged low single digits.

Shareholders will be happy with any raise I’m sure. Once again, this is a company that has been significantly impacted by the pandemic as revenue dropped by ~$24M in 2020.

Upcoming dividend raises, cuts or suspensions

Stella Jones (TSX:SJ)

Stella Jones dividend

Current Streak: 16 years

Current Yield: 1.30%

Earnings: Wednesday, March 10

What can investors expect: Stella Jones (TSX:SJ), a producer of pressure treated lumber products, is one of the more reliable All-Stars. Like clockwork, it announces the dividend raise along with fourth quarter and year-end results.

Market Cap: $3.02 billion
Forward P/E: 15.59
Yield: 1.30%
Dividend Growth Streak: 16 years
Payout Ratio (Earnings): 19.93%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 7.10%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

While it has a strong history of dividend growth, the company’s dividend growth rate is all over the map. In 2019, it raised dividends by almost 17% and last year, the raise came in at only 2%. Granted that raise came near the start of the pandemic, so perhaps they were being cautious in their approach.

What will 2020 bring? Well the good news is that Stella-Jones has respectable payout ratios. The dividend accounts for only 19% of earnings and 23% of cash flows. Given this, the company has ample room to extend its dividend growth streak to 17-years.

Now that companies have more of a handle on how the pandemic has impacted operations, I’d expect a raise somewhere in the mid, single-digit range.

EST DGR

EST Increase

New Div

6.67%

$0.01

$0.16

Premium Brand Holdings (TSX:PBH)

Premium Brands stock

Current Streak: 8 years

Current Yield: 2.24%

Earnings: Thursday, March 11

What can investors expect: A specialty food distribution company, Premium Brands Holdings (TSX:PBH) is expected to release fourth-quarter and year-end results this coming Thursday. Since the eight-year streak began, the company has consistently raised dividends in March.

Market Cap: $4.49 billion
Forward P/E: 25.78
Yield: 2.24%
Dividend Growth Streak: 8 years
Payout Ratio (Earnings): 84.00%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 10.00%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

Over the past five, three, and one-year periods, Premium Brands has averaged approximately 10-11% dividend growth. Will this year’s raise be as high? This will be a tough call.

At this time last year, the company’s payout ratio was 86% but that has since ballooned to 108% as the pandemic has impacted profitability. There is however some good news. The payout ratio against cash flows is only ~60% and EPS is expected to rebound in a big way next year. As such, the payout ratio against forward earnings drops to 55%. 

Over the course of the company’s eight-year streak, Premium Brands has always raised by double-digits. While shareholders would be extremely happy with a raise inline with historical averages, I believe the raise may be more conservative in 2020.

EST DGR

EST Increase

New Div

8.66%

$0.05

$0.6275

Enghouse Systems (TSX:ENGH)

Enghouse dividend
Given the strong cash position, continued performance, and low payout ratios, investors can expect yet another double-digit raise this coming week.

Current Streak: 14 years

Current Yield: 0.98%

Earnings: Thursday, March 11

What can investors expect: Enghouse Systems (TSX:ENGH) is one of the rare TSX-listed tech companies on the All-Star List. At 14-years, it also owns the longest streak in the sector. The company has a history of raising the dividend along with first quarter results which usually come in March.

Market Cap: $3.05 billion
Forward P/E: 30.77
Yield: 0.98%
Dividend Growth Streak: 14 years
Payout Ratio (Earnings): 30.68%
Payout Ratio (Free Cash Flows): Premium Members Only
Payout Ratio (Operating Cash Flows): Premium Members Only
1 Yr Div Growth Rate: 22.70%
5 Yr Div Growth Rate: Premium Members Only
Stocktrades Growth Score: Premium Members Only
Stocktrades Dividend Safety Score: Premium Members Only

Worth noting, Enghouse's dividend growth rate is all over the map. The only consistency has been double-digit raises. Last year, the company raised the dividend by 22.73% which is above historical averages.

The other point worth noting, a special $1.50 per share that the company paid out last month. The company is in excellent financial position with no debt and had a big cash balance at the end of Q4.

Will this special dividend payout stunt growth? Nope. According to the company it will “have the necessary funding available for its acquisition activities.”


EST DGR

EST Increase

New Div

25.93%

$0.035

$0.17

*Mat Litalien has no positions in any of the companies mentioned.

Mathieu Litalien

About the author

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 and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.