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Canadian Dividend All-Stars Expected To Announce Dividend Increases - October 23-27

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Includes: ATGFF, CJREF, FTS, SJR
by: Mat Litalien
Mat Litalien
Value, Growth, macro, long-term horizon
Summary

Corus lost their status as an All-Star last week.

Fortis and AltaGas came through for investors extending their streaks with dividend raises.

Shaw Communications is also on the verge of losing their All-Star Status.

Earnings season is upon us and there are 7 Canadian Dividend All-Stars scheduled to report earnings this coming week. Of those, there are no guarantees of a dividend raise but one is in the same position that Corus (OTCPK:CJREF) was last week, with their All-Star status on the line. There were a few key developments last week, so let’s take at look at what happened before looking ahead.

LAST WEEK - RESULTS

The biggest question mark from last week was Corus’ status as a Canadian Dividend All-Star. After 14-years of dividend growth the company had to announce a raise in either their November or December payouts to maintain their streak. As expected, the company exercised prudence and kept their dividend un-changed. On the flip side both Fortis (FTS) [TSE: FTS] and AltaGas (OTCPK:ATGFF) [TSE: ALA] came through with dividend raises last week.

I spoke to it in a little more detail in my Corus article from earlier this week, but although it is disappointing to see a solid dividend growth streak come to an end, management made the right decision. The company still has some challenges to work through, and with a yield of approximately 9%, there is no urgency for the company to raise their dividend.

After announcing dividends and subsequent raises during the last week of September over the past couple of years, Fortis finally announced their dividend and raised it on October 16th. Their 6.25% raise marks the 44th straight year of dividend growth, and their new quarterly payout of C$0.425 was in line with my estimates and consistent with Fortis’ own guidance. Investors can look forward to similar 6% growth through 2022.

Finally, delivering on their intent to raise dividends in Q4, AltaGas announced a 4.79% raise for a new monthly dividend of C$0.1825, slightly above my expectations. The company posted solid earnings and despite the WGL acquisition weighing on shares, the company showed that future dividend raises are not dependent on WGL. Further to the announcement, the earnings release also detailed that upon the first full year post WGL acquisition, estimated to be 2019, the company expects dividend growth to be approximately 8-10% through 2021.

WILL THEY OR WON’T THEY

Shaw Communications (SJR) [TSE: SJR.B] – Current Streak – 14 YRS, Current Yield – 4.32%

Earnings Release Date: Thursday, October 26

Shaw Communications Inc. is a diversified telecommunications company that operates through four divisions: Consumer, Wireless, Business Network Services and Business Infrastructure Services. The company pays out their dividend monthly and has not raised dividends in 31 straight quarters. Despite the long period of stagnation they have still managed to pay out higher dividends YOY for 14 straight years.

What can investors expect? Much like Corus last week, this is Shaw’s last chance to maintain their status as a Canadian Dividend All-Star. Shaw’s last dividend announcement accompanied Q3 results in June and declared the dividends for September, October and November. The dividends for the following three months should be announced with their upcoming Q4 results. If Shaw fails to announce a dividend raise for their December payout, then they will have effectively paid out the same dividends in 2017 as they had in 2016, thus ending their streak. After years of declining cable TV subscriber growth, Shaw posted their first subscriber growth in this segment since 2010 back in Q3 where they also posted continued wireless growth. The bad news is that Free Cash Flow continued to deteriorate, dropping 27% YOY, about 8% YTD, and dividends currently account for 68% of FCF. Should Shaw announce a raise, I expect a modest increase of C$0.0025/share or 2.5% for a new monthly payout of C$0.1013.

Will we lose another?

If Shaw Communications fails to announce a dividend increase, it will result in back-to-back weeks that companies with 14-year dividend growth streaks fall off the All-Star list. Although Shaw’s FCF position is better than Corus’ current FCF position, they are still trending downward. Once again, it will be interesting to see if management plays it conservative at the expense of their dividend growth streak. It was the right move for Corus, and it may also be the right one for Shaw Communications. Their current 4.32% yield, although not as lofty as Corus’, is still attractive an attractive yield for dividend investors. I believe it is likely that it will be back-to-back weeks that an All-Star loses their status.

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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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