Seeking Alpha

Canadian Dividend All-Stars Set To Announce Dividend Increases In The Week Of March 4

|
Includes: BNS, CM, CNQ, EGHSF, EQGPF, INGXF, PKIUF, STN, TCLAF, TD
by: Mat Litalien
Mat Litalien
Value, Growth, macro, long-term horizon
Summary

Canadian Dividend All-Stars are companies that have raised dividends for at least five consecutive years.

All eight All-Stars expected to raise dividends last week came through for investors.

This week, there are two All-Stars expected to announce a dividend bump.

Well that was a busy week. As we enter March, earnings season is starting to slow as is the pace of companies announcing dividend raises. This week, there are only two Canadian Dividend All-Stars scheduled to report earnings. Before we jump into that, let’s recap all the action from last week. Of note, all figures are in Canadian dollars unless otherwise noted.

LAST WEEK – RESULTS

It was a very busy week as all eight All-Stars expected to raise dividends came through for investors. Dividend raises by the Bank of Nova Scotia (BNS) [TSX:BNS], Toronto-Dominion Bank (TD) [TSX:TD] and Stantec Inc. (STN) [TSX:STN] were below expectations. Innergex Renewable (OTCPK:INGXF) [TSX:INE], Canadian Imperial Bank of Commerce (CM) [TSX:CM], Transcontinental Inc. (OTCPK:TCLAF) [TSX:TCL.A] and Parkland Fuel (OTCPK:PKIUF)[TSX:PKI] all raised in line with expectations. Finally, Equitable Group (OTC:EQGPF) [TSX:EQB] continues its impressive streak, surprising to the upside.

EST

DGR

EST

Increase

ACTUAL

DGR

ACTUAL

Increase

NEW

DIV

Bank of Nova Scotia

3.53%

$0.03

$0.02

2.40%

$0.87

Innergex Renewable

2.94%

$0.005

$0.005

2.94%

$0.175

CIBC

2.94%

$0.04

$0.04

2.94%

$1.40

Equitable Group

3.57%

$0.01

$0.02

7.10%

$0.30

Stantec

10.91%

$0.015

$0.0075

5.50%

$0.145

Transcontinental

4.76%

$0.01

$0.01

4.76%

$0.22

Toronto-Dominion

11.94%

$0.08

$0.07

10.40%

$0.74

Parkland Fuel

2.00%

$0.0022

$0.017

1.70%

$0.0995

For Innergex, CIBC and Transcontinental, there were no real surprises. All raised in line with expectations.

Specific to CIBC, it made the jump from $0.03 per share to $0.04 as expected. Transcontinental suffered a double-digit drop post earnings, and its dividend growth of 4.76% is reflective of its declining growth rate. Parkland missed slightly and low double-digit dividend growth continues to be the story as it expands through acquisitions.

Although Toronto-Dominion missed my estimates by a penny, 10.40% growth is nothing to be disappointed about. Perhaps I was a little too optimistic as the majority of banks had a rough quarter on the back of poor asset management and capital market performance. That being said, it still has the best growth rate among the Big Five banks.

Speaking of the Big Five, the Bank of Nova Scotia raised below historical averages. It has plenty of acquisitions to digest and it had arguably the worst quarter of all the big banks. Despite this, it remains an attractively valued stock.

Stantec posted the biggest miss of the group. It raised dividends by $0.0075, half of what I was expecting. This was also well below its historical averages of 10%. Slowing earnings growth is most likely to blame as it has yet to achieve more than mid-single-digit growth over the past number of years. Looking forward, it is much of the same story (mid-single-digit growth).

Finally, what more is there to say about Equitable Group. It continues to defy expectations and is arguably one of the best dividend growth stocks on the All-Star list. On the back of continued outperformance, the bank raised dividends by 7.10% and its new quarterly rate is now $0.30 per share.

Expected Dividend Raises

Enghouse Systems Ltd. (OTCPK:EGHSF) [TSX:ENGH]

  • Current Streak: 12 years
  • Current Yield: 1.89%
  • Earnings: Thursday, March 7

What can investors expect: Enghouse is one of those companies that flies under the radar. It shouldn’t. Over the past five years, the company has returned on average 25% and it is one of the few technology companies on the All-Star list. It typically raises its dividend along with first-quarter results.

Enghouse’s last four dividend raises were exactly $0.01 per share, hence its declining growth rate. It recently announced a share split that will affect the dollar amount of its next raise. Enghouse is one of those tech companies that thrives on acquisitions. If it can deploy capital towards attractive M&A opportunities, expect it to do so.

That being said, the company has a low payout ratio of approximately 30% and earnings are expected to grow by 11.5% on average over the next few years. As such, it has plenty of room for further double-digit dividend growth.

EST DGR

EST INCR

EST NEW DIV

11.11%

$0.02

$0.20

Canadian Natural Resources (CNQ) [TSX:CNQ]

  • Current Streak: 18 years
  • Current Yield: 3.56%
  • Earnings: Thursday, March 7

What can investors expect: Canadian Natural is one of the largest oil & gas companies north of the border. Despite a volatile environment, it has remained steadfast in its commitment to dividend growth. The company usually announces its raise along with fourth quarter and year-end results.

What to expect? It’s a tough one to call. Last year, the company raised dividends by 21%, far above its three- and five-year averages. Although I do not expect the company to sustain 20%+ dividend growth over the long term, double-digit growth is still likely.

The company is expected to grow production at a compound annual growth rate of 7.5% and it is reducing operating costs. Through the first nine months, dividends accounted for only 26% of cash flows.

EST DGR

EST INCR

EST NEW DIV

19.40%

$0.065

$0.40

Disclosure: I am/we are long TD. 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.