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November 27, 2020

Canadian Dividend All-Stars – Week of Nov 30

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

November 27, 2020

This coming week we head into bank earnings season. Typically, it is an exciting time for dividend growth investors and those who own Canadian dividend stocks.

Unfortunately, it won’t be this year (more on that later).

This week, investors can expect only one Canadian Dividend All-Star to come through with their annual raise. Before we get into that, let’s take a quick look at what happened over the past couple of weeks.

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

Recent dividend updates

In our last update, we weren’t expecting any action from Canadian Dividend All-Stars.

However, we had two pleasant surprises as George Weston (TSX:WN) and Alimentation Couche-Tard (TSX:ATD.B) both announced dividend raises.

Company

EST DGR

EST Increase

Actual DGR

Actual Increase

New Div

George Weston

~5%

$0.025

4.76%

$0.025

$0.55

Alimentation Couche-Tard

N/A

N/A

25.00%

$0.0175

$0.0875





Let’s start with George Weston. The company typically announces its annual raise in May of each year. However, uncertainty caused by the pandemic led to George Weston forgoing their annual dividend raise this past spring.

Fast forward November 17, 2020 and George Weston finally came through for investors after six quarters of dividend stagnation.

The company announced a 4.76% raise to the dividend which is slightly below the company’s historical average for high, single digit dividend growth.

The raise will effectively extend the company’s dividend growth streak to nine years.

Turning our attention to Alimentation Couche-Tard, the company announced a surprise 25% raise to the dividend this past week.

This mark’s the company’s second raise of the year as it had previously raised the dividend by 12% this past March.

In total, Alimentation Couche-Tard grew the dividend by 40% in 2020. Given the pandemic has significantly impacted M&A activity, it appears the company chose to put some of that $6 billion in cash to work through dividends.

Upcoming dividend raises, cuts or suspensions

Tecsys (TSE:TCS)  

  • Current Streak: 12 years
  • Current Yield: 0.66%
  • Earnings: Wednesday, December 2

What can investors expect:

Tecsys Inc is one of the few tech stocks that have a reliable dividend growth streak.

Over the past couple of years, this supply chain solution company announced its annual raise along with second quarter results.  

Estimating the growth rate, is a much more challenging task. The company’s dividend growth rate has been all over the map.

Last year, the company raised dividends by 10% which was well below historical averages.

This year, I am estimating a raise of at least $0.005-$0.01 per share.

Tecsys has seen an increase in demand for its products and has experienced strong revenue and adjusted EBITDA growth over the past couple of quarters.

EST DGR

EST Increase

 Est New Div

8.33%-16.67

$0.005-$0.01

$0.065-$0.07

Canada's Banks

At this time of the year, dividend growth investors would expect the Bank of Montreal (TSX:BMO) and National Bank (TSX:NA) to announce their bi-annual dividend raise.

Unfortunately, the Office of the Superintendent of Financial Institutions (OFSI) is in no hurry to give banks the green light.

In a speech to the bankers earlier this week, OSFI superintendent Jeremy Rudin had this to say:

“There is no set date nor specific economic indicator that will trigger our decision.” – in relation to relaxing restrictions on dividend raises.

He further stated,

“it is my job to remind you that it (pandemic/economic outlook) could get worse before it gets better. In severe but still plausible scenarios, it could get much worse.”

As you can see, it appears that banks and other financial intuitions such as insurers will be stuck in dividend stagnation mode for some time.

I estimate that the green light to reinstate dividend growth won’t be given until mid-to-late 2021 at the earliest.

* Mat Litalien is long BMO. 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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