7 Canadian Dividend Stocks For U.S. Investors

Includes: BCE, BMO, BNS, CM, MFC, RY, SLF
by: Plan B Economics

You don't have to go far for yield. In fact, there are numerous foreign dividend-paying stocks listed on American exchanges making them easily accessible to U.S. investors.

While there are a number of European and Asian companies paying attractive dividends, today I will present a selection made available by our friends from the North. While Canadians may talk differently, their laws and business practices are very similar making Canadian companies a great first step in the global search for yield.

Below I have listed the seven U.S.-listed Canadian companies with the highest dividend yield. But don't hit a market order just yet...not all dividends are created equal.

While the companies in the list below are Canadian behemoths with a rich history in what could arguably be called oligopolistic industries, I believe two deserve to be immediately struck from the short-list: Manulife Financial (NYSE:MFC) and Sun Life Financial (NYSE:SLF). Both have massive-to-negative payout ratios due to low and negative earnings per share, which I believe put at risk the sustainability of their dividends. Furthermore, both are life insurers and variable annuity providers which, in my opinion, are generally suffering from extremely low interest rates. I'm not necessarily calling these bad investments - there may be a contrarian play with the big insurers. I am, however, saying that dividend investors might want to think twice about entrusting their distributions to companies that earn less than they pay in dividends.

This leaves BCE and a few core banks:

Ticker Company Dividend Yield Payout Ratio
(SLF) Sun Life Financial Inc. 6.39% n/a
(NYSE:BCE) BCE, Inc. 4.87% 72.51%
(NYSE:BMO) Bank of Montreal 4.82% 51.67%
(NYSE:CM) Canadian Imperial Bank of Commerce 4.72% 51.18%
(MFC) Manulife Financial Corporation 4.70% 359.00%
(NYSE:RY) Royal Bank of Canada 4.31% 50.99%
(NYSE:BNS) The Bank Of Nova Scotia 4.06% 46.83%
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Fat yields with respectable payout ratios - I like!

Everyone likes earnings to be above dividends. But this can only be maintained if a company is profitable. The following table highlights the profitability of each company:

Ticker Operating Margin ROA ROE Total Debt/Equity
BCE 17.03% 6.99% 21.87% 1.08
BMO 30.12% 0.75% 15.34% 4.51
CM 30.44% 0.78% 20.27% 4.23
RY 30.63% 0.86% 18.71% 1.54
BNS 38.35% 0.87% 17.39% 1.8
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What about valuations? Not much to see here. All have fairly moderate valuation ratios, perhaps with BCE standing out as a more expensive alternative.

Ticker P/E Forward P/E P/S P/B
BCE 14.7 13.25 1.68 2.4
BMO 10.8 9.46 2.78 1.38
CM 10.7 8.88 2.6 1.85
RY 11.7 9.96 3.63 1.82
BNS 11.9 10.3 3.34 1.76
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Overall, I believe any of these companies deserve further attention to determine whether they are suitable investments to add to a diversified portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Data source: Finviz. This is not advice. While the author makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.