I recently searched high and low for Canadian dividend payers and companies that demonstrated an attempt to raise their dividends over longer periods in articles here and here. They were conveniently entitled "In Search of Canadian Dividends", and "In Search of Canadian Dividends. Part II."
My investigation led to the obvious conclusion that true dividend aristocrats (companies that have raised their dividend for 25 consecutive years) are as rare as a Canadian $2 bill. Yes you can also insert a $2 American greenback into that sentence if you'd like.
The reason for undertaking this research (other than sharing with readers of course) is that I wanted to discover how I could cover the Canadian dividend landscape through ETFs. I currently hold the broad based TSX 60, Canadian ticker XIU, of course. And as I stated in this article, I am holding ishares XEI as a high yielding dividend growth proxy. XEI has a juicy 4.5% yield and as I stated in the XEI article, a dividend growth rate estimated at 8%. For an ETF that offers a very decent combination of yield and growth. XEI has a management expense ratio - MER of .62%.
Here's a look at the holdings of XEI with respect to current yield (I have updated as per TD Waterhouse), dividend growth rate and duration and payout ratio. Please note that I have not been a purist with respect to dividend growth. There may have been some cuts or stalls along the way. I will address the pure dividend growth machines in a future article. Tickers that are bracketed are available on the NYSE for our American friends. If the ticker is not bracketed, the symbol listed is on the Toronto Stock Exchange. OTC and Pink Sheet Tickers are listed below in this article.
Here's the top 25 …
| ishares XEI | ||||||
| Company | Ticker | Yield | Growth | Period | PO Ratio | % of ETF |
| Thompson Reuters | (TRI) | 4.2% | 1.15% | 6 years | 51% | 5.2 |
| Shaw | CJR.A | 3.6% | 6.2% | 5 years | 46% | 5.2 |
| BCE | (BCE) | 5.0% | 7.4% | 10 years | 70% | 5.2 |
| BMO | (BMO) | 4.6% | 8.9% | 10 years | 47% | 5 |
| CIBC | (CM) | 4.5% | 10% | 10 years | 47% | 4.8 |
| Crescent Point | CPG | 7.3% | 5.8% | 10 years | 438% | 4.3 |
| Sun Life | (SLF) | 5.0% | 10.5% | 10 years | 61% | 3.9 |
| Canadian Oil Sands | COS | 6.5% | Na | Na | 67% | 2.9 |
| Pembina Pipelines | (PBA) | 5.2% | 5.5% | 8 years | 193% | 2.7 |
| Husky Energy | HSE | 3.9% | 19% | 10 years | 58% | 2.7 |
| Transalta | (TAC) | 7.7% | 1% | 15 years | Na | 2.7 |
| ARC Resources | ARX | 4.5% | Na | Na | 256% | 2.5 |
| Bell Aliant | BA | 7% | 5.7% | 10 years | 128% | 2.4 |
| Power Corp | POW | 4.2% | 12.7% | 10 years | 51% | 2.1 |
| Inter Pipeline | IPL.UN | 4.2% | 4.5% | 10 years | 51% | 2.0 |
| Aimia | AIM | 4.0% | 16.8% | 6 years | 70% | 1.9 |
| RioCan | REI.UN | 5.2% | 1.15% | 8 years | 30% | 1.8 |
| Baytex Energy | (BTE) | 5.9% | 3.9% | 10 years | 122% | 1.6 |
| Great West Life | GWO | 4.5% | 6.2% | 17 years | 64% | 1.6 |
| Penn West | (PWE) | 9.8% | Na | NA | 294% | 1.6 |
| Power Financial | (PFE) | 4.7% | 11% | 14 years | 54% | 1.6 |
| Vermillion Energy | VET | 4.6% | Na | Na | 213% | 1.6 |
| Manitoba Telcom | MBT | 5.1% | 5.9% | 15 years | 64% | 1.6 |
| Cineplex Inc. | CGX | 4.0% | 3.7% | 2 years | 67% | 1.5 |
| Corus Entertainment | CJR.B | 4.0% | 8.9% | 5 years | 67% | 1.5 |
(Click to enlarge)
As you can see XEI is heavy on the energy and financials. OK, everything in Canada is heavy on oil and gas and financials. That's why I was in search of another ETF or two that would be heavy on the oil and financials, but perhaps in a different arrangement ... ha. My search led me to the very new Dividend ETF from Vanguard - VDY. I will admit to having purchased some VDY just yesterday. It has a MER of .30%.
Here's how VDY looks, this time with the top 26. Companies that are listed with an asterisk* are also represented in XEI. If you own both, like I do, you will be duplicating, and increasing your exposure to those companies.
| Vanguard VDY | ||||||
| Company | Ticker | Yield | Growth | Period | PO Ratio | % of ETF |
| Royal Bank | (RY) | 4.0% | 13.5% | 15 years | 47 | 12 |
| TD Bank | (TD) | 3.8% | 12.0% | 15 years | 42 | 10.6 |
| Scotiabank | (BNS) | 3.9% | 12.5% | 15 years | 70 | 9.5 |
| BMO* | 4.6% | 8.9% | 10 years | 47 | 5.5 | |
| Enbridge | (ENB) | 2.8% | 9.5% | 17 years | 146 | 4.8 |
| CIBC* | 4.5% | 10% | 10 years | 47 | 4.7 | |
| TransCanada | (TRP) | 3.8% | 3.9% | 15 years | 95 | 4.5 |
| Canadian Oil Sands* | COS | 6.5% | Na | Na | 67 | 3.5 |
| Manulife | (MFC) | 3.3% | 5.5% | 8 years | 58 | 3.5 |
| Cenovus Energy | (CVE) | 2.9% | Na | na | 67 | 3.5 |
| Sun Life * | 5.0% | 10.5% | 10 years | 61 | 2.2 | |
| Encana | (ECA) | 4.1% | Na | Na | Na | 2.0 |
| Crescent Point | CPG | 7.1% | 5.7% | 10 years | 438 | 1.9 |
| National Bank | (NA) | 4.3% | 12.7% | 10 years | 33 | 1.8 |
| Thomson Reuters* | 4.2% | 3% | 6years | 51 | 1.7 | |
| Bell Canada * | 5.0% | 7.4% | 10 years | 70 | 1.5 | |
| Power Corp* | POW | 4.2% | 12.7% | 10 years | 51 | 1.5 |
| Canadian Oil Sands* | COS | 6.5% | Na | Na | 67 | 1.4 |
| Shaw Comm* | (SJR) | 4.2% | 3.6% | 5 years | 46 | 1.4 |
| Intact | IFC | 2.7% | 8.0% | 3 years | 37 | 1.2 |
| Husky Energy* | HSE | 3.9% | 19% | 10 years | 58 | 1.2 |
| Pembina Pipelines* | 5.2% | 5.5% | 8 years | 185 | 1.2 | |
| Power Financial Corp* | PWF | 4.7% | 11% | 14 years | 54 | 1.1 |
| ARC Resources* | ARX | 4.5% | Na | Na | 256 | 1.0 |
| Great West Life* | GWO | 4.5% | 6.2% | 17 years | 64 | 1.0 |
| Fortis | FTS | 3.7% | 6.6% | 17 years | 74 | 1.0 |
| TSX 60 | XIU | 2.1% | 10% | 12 years | na | na |
(Click to enlarge)
For those looking of OTC or Pink Sheet ticker of Canadian stocks not listed on the NYSE, here ya go...
| Shaw | SAWLF.PK |
| Crescent Point | CSCTF.PK |
| Canadian Oil Sands | COSWF.OB |
| Husky Energy | HUSKF.PK |
| ARC Resources | AETUF.PK |
| Bell Aliant | BLIAF.PK |
| Power Corp | PWCDF.PK |
| Inter Pipeline | IPPLF.PK |
| Aimia | GAPFF.PK |
| RioCan | RIOCF.PK |
| Manitoba Telcom | MOBAF.PK |
| Cineplex Inc. | CPXGF.PK |
| Corus Entertainment | CJREF.PK |
| Sun Life | SLFXF.OB |
| Intact | IFCZF.PK |
| Power Financial Corp | POFNF.PK |
| Fortis | FRTSF.PK |
That's just great (yes I am being sarcastic), the sector weighting of financials to energy goes from 30-30 in XEI to 60-27 for VDY. XEI is actually a little more generous with the consumer discretionary, utilities and telco's. It's obvious that a Canadian will have a challenge gaining balanced sector exposure through ETFs. These ETFs are cap weighted, and Canada is dominated by energy and financials.
That's reason why a Canadian dividend investor (one who has time to monitor companies and portfolio weightings) may want to exercise a little equal weighting of their own and top up their ETF with a purchase or six of companies within the consumer discretionary, utilities, telco's, industrials and materials baskets. One should consider keeping those individual company concentration levels within the limits of the underlying ETFs. XEI has a maximum of 5%, while VDY has Royal Bank of Canada at a whopping 12%. I wouldn't see this as stock picking. The companies are within the index and meet the criteria of the index manager. It is equal weighting. It will simply reduce your over-concentration to those sectors. That said, I think Canadian investors with those two ETFs have the dividend bases covered.
Personally, as I stated in the previous articles, I hold two utilities in Enbridge (EEP) and TransCanada (TRP). I also hold Tim Hortons (THI) - that would be considered a consumer discretionary. But we Canadians know that Tim's is more of a staple - Canadians are addicted to the coffee and more importantly, the brand. I am also looking to beef up on the telco's. Like Canadian banks, they enjoy an oligopoly arrangement that gives them pricing power and an ever-increasing moat. They are cash machines.
Thanks for the read and discussion. I will next look at the "odd stocks out" from my lists in articles one and two. There are a few promising companies on the lists that are not included in either of the ETFs. They have nice yields and some surprising dividend growth rates. Too good to be true in most instances I would guess. But some initial research leads me to believe there might be a gem or three that are not included in the dividend ETFs.
Stay tuned.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DIA, THI, ENB, TRP over the next 72 hours. Dale Roberts aka cranky is a Streetwise Coach at ING Direct Canada (a subsidiary of Scotiabank). Streetwise Portfolios offer Canadians low-fee, turnkey, index-based portfolio options. Dale’s commentary does not constitute investment advice, the opinions and information should only be factored into an investor's overall opinion forming process.
