Canadian Dividend All-Stars Expected To Announce Dividend Increases - October 16-20

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Includes: ATGFF, CJREF, EMRAF, FTS
by: Mat Litalien

Summary

Fortis remained silent and has yet to announce their dividend.

Emera surprised with a raise earlier than expected.

Corus' status as a Dividend All-Star is on the line.

We are now entering mid-October and earnings season is starting to ramp up again with 3 Canadian Dividend All-Stars scheduled to report earnings. Of those, there are no guarantees of a dividend raise, but one is on watch as it remains to be seen if they will maintain its All-Star status. It’s been a few weeks since our last update, so let’s catch up before we look into what is expected this week.

LAST WEEK - RESULTS

The last few weeks didn’t exactly go as planned as the lone All-Star I fully expected to raise dividends, Fortis (FTS) [TSE: FTS] failed to make a dividend announcement. On the flip side, Emera (OTCPK:EMRAF) [TSE: EMA], which was wasn’t expected to raise until October, surprised with a raise on September 29th.

During my monthly update, I delved a little deeper into Emera, but to summarize, the company raised dividends by $0.0425 for a new quarterly rate of C$0.5650. The raise was completely in line with management’s guidance which is 8% annual dividend growth through 2020.

After announcing dividends and subsequent raises during the last week of September over the past couple of years, Fortis has remained silent on Q4 dividends. As such, investors can now look towards their Q4 earnings release, which is when they announced their dividend increases prior to 2015. They are scheduled to report on Friday, November 3.

Finally, in the last update, we also talked about AltaGas (OTCPK:ATGFF) [TSE: ALA], and true to form, they announced their most recent monthly dividend this past week, but it was in line with their previous payout. As a reminder, in AltaGas’ Q2 earnings conference call, the company clearly articulated that their dividend raise would come in Q4 and would be in the range of 8-10%. With no increase announced in October, investors can now look forward to the second Monday in November for their next dividend announcement.

WILL THEY OR WON’T THEY

Corus Entertainment (OTCPK:CJREF) [TSE: CJR.B] – Current Streak – 14 YRS, Current Yield – 8.89%

Earnings Release Date: Wednesday, October 18.

Corus Entertainment Inc. is a media and content company that creates and delivers quality brands and content across platforms for audiences around the world. The company has a vast portfolio of multimedia offerings and includes premium brands such as Global Television, W Network, HGTV Canada, Food Network Canada, HISTORY, Showcase and National Geographic Channel, among others. Corus pays out dividends on a monthly basis and last raised their dividends back in February of 2015. Of note, despite the long streak of stagnation, Corus has still maintained higher dividends paid YOY.

What can investors expect? This is Corus’ last chance to maintain their status as a Canadian Dividend All-Star. Typically, the company’s dividend announcement contains the payouts for the following three months. In this case, October’s announcement would reflect the dividends for November, December and January. If Corus fails to announce a dividend raise for either their November or December payouts, then they will have effectively paid out the same dividends in 2017 as they had in 2016, thus ending their streak. For Corus, it all comes down to cash flow and investors cannot take it at face value because of the structure of their Shaw Media acquisition. This past August, the lockup period expired, and as opposed to receiving their dividends in the form of additional shares via DRIP, all the Corus shares owned by Shaw investors are now entitled to cash dividends. In one of my previous articles on Corus, I estimated what this impact might be, and I estimated over the first 9 months of 2017, their payout ratio as a percentage of free cash flow would be approximately 82%. Overall, should Corus announce a raise, I expect a modest increase of C$0.005/share or 5.3% for a new monthly payout of C$0.10.

CORUS ACQUISITION HAS STALLED THEIR DIVIDEND GROWTH

Corus’ recent acquisition of Shaw Media has not resulted in the immediate synergies the company originally anticipated. That being said, over the past few quarters, the benefits have started to materialize and Corus’ cash flow situation has vastly improved. Should Corus continue to improve their cash flow position, it’s possible they come through with a raise for investors despite their astronomical current yield. On the flip side, if they stumble or their cash flow stagnates in anyway, they would be wise to stay the course and maintain their dividend at the current rate as their FCF payout ratio is already uncomfortably high. Of note, the company has already stated that their goal is to maintain their dividend at the current level which is why investors should be prepared for the likelihood the company will lose their All-Star status. Should they lose their status but achieve their goal, investors should not fret as they can still enjoy an inflated yield which is nearing 9%.

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Disclosure: I am/we are long FTS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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