18 High Dividend Canadian Stocks

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Includes: BCE, BMO, BNS, BPO, BTE, CM, ENY, ERF, EWC, FXC, JPM, PDS, THE
by: Hao Jin, CFA
2008 financial crisis uncanny echoes with what happened in Japan more than a decade ago. In the 1990s, the Japanese banking systems had become overloaded with bad loans after a property bubble collapse, according to Gillian Tett, author of Fool’s Gold. The investor psychology seemed dangerously similar too. If this is the case, investors who buy high yield stocks now could collect big dividends while the economy fights to get back on its feet.
Associated Press reports on Friday that the U.S. federal budget deficit has surged to an all-time high of $1.42 trillion. The Obama administration projects deficits will total $9.1 trillion over the next decade. For weeks dollar’s decline sent gold to all-time highs and helped oil to over $78. Canada happens to have plenty of these commodities.
Followings are 18 Canadian companies listed in U.S. exchanges with market cap greater than $1 billion, reasonable P/E and dividend yield greater than 3.5% (sorted by yield):
Name
Symbol
P/E
Yield
Market Cap
PROVIDENT ENERGY
(PVX)
9.0
11.1%
1.66B
PENGROWTH EGY
(PGH)
5.0
10.6%
2.61B
PENN WEST ENERGY
(PWE)
5.1
10.1%
6.90B
ENERPLUS RES FD
(NYSE:ERF)
5.8
8.4%
3.97B
HARVEST ENERGY
(HTE)
4.2
8.1%
1.14B
B C E INC
(NYSE:BCE)
21.7
6.1%
18.82B
TELUS CORP
(NYSE:TU)
8.6
5.8%
9.41B
PRECISION DRILL
(NYSE:PDS)
4.3
5.7%
1.91B
BANK OF MONTREAL
(NYSE:BMO)
17.3
5.1%
27.68B
TRANSALTA CORP
(NYSE:TAC)
21.9
5.1%
4.07B
BAYTEX ENERGY
(NYSE:BTE)
12.8
5.0%
2.77B
CANADIAN IMP BK CO
(NYSE:CM)
3.7
5.0%
2.98B
BROOKFIELD PTYS CP
(NYSE:BPO)
6.2
4.6%
4.47B
TRANSCANADA CORP
(NYSE:TRP)
15.1
4.3%
21.71B
SHAW COMM CL B NV
(NYSE:SJR)
15.6
4.2%
8.24B
ROGERS COMMUN
(NYSE:RCI)
16.8
4.0%
16.57B
BANK OF NOVA SCO
(NYSE:BNS)
16.7
3.9%
45.86B
TORONTO DOMINION
(NYSE:TD)
17.4
3.5%
53.70B
These 18 high dividend companies are in 4 sectors: Energy, Financial, Telecom and Utilities.
Energy Income Trust
High demand from China and weak dollar make energy sector attractive. 7 companies belong to this category:
Symbol
Operating Margin
Debt/Operating CF
52-wk Range
(BTE)
36%
1.0
7.84 - 26.44
(ERF)
51%
0.7
12.85 - 28.58
(HTE)
10%
3.2
3.00 - 11.55
(PDS)
28%
2.0
2.00 - 12.21
(PGH)
22%
2.5
4.51 - 11.90
(PVX)
23%
1.5
2.23 - 6.84
(PWE)
58%
2.3
6.77 - 19.01
These income trusts, like REITs, are required to pay out a large portion of their earnings. In 2011 after they convert from income trust into corporation, most likely they might still be high-dividend players. 52-week-price-range data shows these income trusts are very volatile. Their recent runs could be slowed or reversed if U.S. dollar shows strength.
For sophisticated traders, trading commodity directly might provide higher reward. For income investors, commodity companies might be a better choice because they provide some buffer, in addition to regular dividends.
There is a small ETF called Claymore Canadian Energy Income (NYSEARCA:ENY) which includes most of these companies. Its yield is 5.45%.
Financials
Followings are comparisons between Canadian banks, U.S. major banks average as well as JPMorgan Chase (NYSE:JPM), one of the most conservative banks in the US. Clearly Canadian banks are much more profitable.
Description
P/E
ROE
Yield
Net Profit Margin
U.S. Money Center Banks
n/a
1.1%
1.1%
1.3%
JPMorgan (JPM)
52.6
2.9%
0.4%
15.5%
Toronto-Dominion(TD)
17.6
9.4%
3.5%
22.2%
Bank Of Nova Sc (BNS)
16.8
13.2%
3.9%
28.9%
CIBC (CM)
3.8
7.0%
5.0%
18.8%
Bank of Montreal (BMO)
17.4
9.2%
5.1%
21.8%
Followings are dividends charts. Data is based on US$ so it might fluctuate with currency. Nonetheless, you can still see the trends of each company’s dividend history.
Brookfield Properties (BPO) is a premier commercial REIT.
Telecom
Competition in telecom sector is heating up in Canada. When BCE (BCE) and Telus (TU) announced they will start carrying iPhone next month, which puts an end to the exclusivity that Rogers (RCI) has enjoyed, it sent RCI’s short ratio to an stunning high of 33. Shaw Communications (SJR) primarily focuses on cable services.
Without a growth, a stock with P/E higher than 20 is certainly not cheap. Following chart shows that over the last 20 years, BCE’s dividend was very stable.


Utility
TransAlta (TAC) is an electric utility company while TransCanada (TRP) operates through two segments: pipelines and energy. TAC’s short ratio of 5.8 makes me nervous.
Conclusion
After boldly buying when others were selling, Warren Buffet is pulling back, buying fewer stocks while investing in debt. He is warning that the economy, though on the mend, remains deeply troubled.
In addition, the Canadian dollar is a strong threat to Canadian economy. CurrencyShares Canadian Dollar Trust (NYSE:FXC) appreciated over 13% this year. Mark Carney, the governor of the Bank of Canada, has warned that the Canadian dollar appears to move away from fundamentals.
iShares MSCI Canada Index (NYSEARCA:EWC) year-to-date’s return is an astonishing 46%. A great stock can be easily turned into a bad investment, if you buy it at a higher than reasonable price. It all depends on the starting price.
Nonetheless, high dividend fundament-strong companies are more likely to survive in this stormy market. One of the greatest ways to protect you is asset allocation: make sure not a single sector accounts for more than 20% of portfolio. It will automatically enroll you into “buy low, sell high” camp.
Disclose: I have long positions on BMO, BNS, CM, PWE, TD, and TRE. All data is from Yahoo Finance (http://finance.yahoo.com/) as of Oct 16, 2009.