In yesterday’s post, I discussed some of the major benefits that I see in owning foreign paying dividend stocks that are listed on U.S. exchanges. I will try to take a look at a few different countries but one of the more obvious ones (but still easy to overlook) is Canada. When looking, I started by taking a deeper look into countries that had attractive currencies in the long term and then following up with a look for solid dividend candidates.
So why Canada?
The Canadian economy and its currency, the dollar (often referred to as the loony) are set to enjoy a relatively good time in the next few decades. Why? Here are some of the reasons:
- Economy is already going strong and did not require much stimulus in the recent downturn.
- The central bank and federal governments have very limited debt and have actually been enjoying budget surpluses in the most recent decade.
- The Canadian economy is mostly built around natural resources which should continue to be in strong demand in the coming decades thanks to China, India and others.
- Inflation is low and stable.
- Corporate tax rates have been diminishing thanks to the healthy finances by both federal and provincial governments.
- Generally recognized as having the most stable banking system.
These are some of the many reasons why having exposure to Canadian companies can be very profitable in the long term. These companies are likely to enjoy solid profits (especially the Canadian banks which face little competition) and the Canadian dollar which most of them pay their dividends in will likely continue to rise for a long time. When looking in Canada, you would generally do well by investing in either financial companies (banks and insurance) or commodities. The former is a much better fit for a passive income dividend portfolio so that is where we will start.
Obviously, as regulars can guess, we will take a look through the 20 things that we look at when analyzing dividend stocks:
Ticker Name Industry Current Dividend Yield 5 year Dividend Growth 1 year Dividend Growth CM Canadian Imperial Bank of Commerce Bank 4.56 8.57 10.08 RY Royal Bank of Canada Bank 3.73 14.11 8.66 BNS Bank of Nova Scotia Bank 3.22 10.94 10.65 TD Toronto-Dominion Bank/The Bank 3.32 11.71 10.17 BMO Bank of Montreal Bank 4.85 11.62 8.11 SLF Sun Life Financial Inc Insurance 4.51 10.41 4.69 MFC Manulife Financial Corp Insurance 2.77 -0.38 -13.45
To me, it seems clear that almost all of these banks and insurance companies get great scores for their dividends. They have only recently restarted hiking their dividends after going through a difficult time (although nothing comparable to U.S. banks) but just take a look at the current dividend yields and high dividend growth rate, it’s very impressive.
Ticker Sales Growth (1 year) Sales Growth (5 year) Earnings growth P/E ratio Payout ratio Return on Equity Debt to Capital Ratio CM 8.28 5.36 N/A 13.3 59.13 19.22 1.39 RY -7.46 4.25 9.23 15.88 57.26 14.99 1.23 BNS -5.14 5.67 33.04 N/A 50.1 18.06 N/A TD -0.05 6.23 2.96 14.05 47.6 11.99 0.95 BMO -3.82 1.16 22.62 12.54 58.75 14.48 2 SLF -10.63 -2.52 28.17 N/A 50.94 9.98 N/A MFC -6.38 -11.76 N/A N/A 93.22 4.96 N/A
These numbers are not as stunning as the dividend ones were but they remain strong. There will be more volatility in the earnings for the banks because of the trading element of it but overall the numbers are solid and the payout ratios are very reasonable which signals that these could continue hiking the dividends for many more years.
Ticker Name Industry Trend Analysis Price Trading Volume CM Canadian Imperial Bank of Commerce/Canada Bank 100 84.95 288681.5625 RY Royal Bank of Canada Bank 100 61.72 724490.9375 BNS Bank of Nova Scotia Bank 100 61.3 504423 TD Toronto-Dominion Bank/The Bank 100 86.12 694943.1875 BMO Bank of Montreal Bank 90 63.57 1543495.5 SLF Sun Life Financial Inc Insurance 65 32.81 479862.0313 MFC Manulife Financial Corp Insurance 85 19.08 2763706.75
These numbers are once again very solid and signal the strength of these Canadian banks. Most indicate a strong buy sign through their trend analysis score.
Overall, these companies, especially the 5 banks look incredibly strong and should certainly be part of a diversified passive income dividend portfolio. They already have very strong dividend metrics and because of the laws in Canada, will not face more competition in the coming years.