Canadian Dividend All-Stars Set To Announce Dividend Increases In The Week Of April 29

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Includes: IMO, LBLCF, OTEX, PBA
by: Mat Litalien
Summary

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

Last week, Imperial Oil reached its 25th consecutive year of dividend growth.

This week, there are three All-Stars expected to announce a dividend increase.

As we close out the month and begin a new one, earnings north of the border are starting to ramp up. This week, there are more than 20 Canadian Dividend All-Stars scheduled to report earnings. Of those, expect at least a few to announce a dividend increase. Before we dive into this coming week, let's take a look at last week's results. Of note, all figures are in Canadian dollars unless otherwise noted.

Last Week's Results

Last week, Imperial Oil (IMO) [TSX:IOM] came through as expected with its 25th consecutive annual dividend increase.

EST

DGR

EST

Increase

ACTUAL

DGR

ACTUAL

Increase

NEW

DIV

Imperial Oil

15.79%

$0.03

$0.03

15.79%

$0.22

On Friday, Imperial Oil became only the fifth TSX-listed company to reach the quarter century mark for dividend raises. As a dual-listed company, the company will also have the distinction of being promoted to David Fish's list of U.S. Dividend Champions.

As expected, the company's 15.79% raise was slightly higher than historical averages and in line with last year's $0.03 per share raise. The company's new quarterly payout is now $0.22 per share.

Expected Increases

Loblaws (OTCPK:LBLCF) [TSX:L]

  • Current Streak: 7 years
  • Current Yield: 1.79%
  • Earnings: Wednesday, May 1

What can investors expect: Loblaws, one of Canada's largest grocery chains, is due to report first-quarter earnings this coming Wednesday. Since its recent dividend growth streak began, the company has announced a dividend increase along with first-quarter results.

Last year, Loblaws surprised to the upside with a 9.26% raise, which was double its historical averages. Based on earnings estimates for the next 12 months, the company's payout ratio is a reasonable 27%. As such, a raise similar to last year's $0.025 per share raise is entirely plausible.

EST DGR

EST INCR

EST NEW DIV

8.47%

$0.025

$0.32

Open Text Corp. (OTEX) [TSX:OTEX]

  • Current Streak: 6 years
  • Current Yield: 1.58%
  • Earnings: Wednesday, May 1

What can investors expect: Open Text is one of only four technology stocks that have achieved All-Star Status. Since the company's streak began, it has consistently announced a dividend increase along with third-quarter results in early May. Of note, Open Text pays out its dividend in U.S. funds.

Over the past few years, Open Text has an average annual dividend growth rate of approximately 15%. Last year, the company raised dividends by exactly 15%. Based on this pattern, logic would dictate another 15% raise in 2019.

Not so fast. Before last year, Open Text was growing at a double-digit clip. In 2018, however, the company posted negative growth. Looking forward, the company is only expected to grow earnings by 6.6% and 8.8% in 2019 and 2020 respectively.

As such, it's possible that Open Text adopts a more conservative approach to dividend growth until such time double-digit earnings growth returns.

EST DGR

EST INCR

EST NEW DIV

10.01%

$0.0152

$0.1670

Pembina Pipeline Corp (PBA) [TSX:PPL]

  • Current Streak: 7 years
  • Current Yield: 4.60%
  • Earnings: Thursday, May 2

What can investors expect: Pembina Pipeline, a monthly dividend payer, is an attractive income play for investors with its high yield. The company has an inconsistent history of raising dividends, but its last raise came in May of last year, and it has kept its dividend steady for 12 straight quarters.

Pembina's dividend growth rate was on the rise until last year, when its 6% raise was below its historical three- and five-year averages. It has raised its dividend three times since 2017, and each was exactly a penny.

Pembina has a fiscal policy to keep its dividend below 100% of fee-based distributable cash flow. In 2018, the ratio dropped to 75% from 135% in 2017.

In 2018, fee-based earnings represented approximately 61% of adjusted EBITDA. This number is expected to jump to 64% in 2019, and adjusted EBITDA is expected to grow by 3.5% at the mid-range of guidance.

Taking all of this into account, a raise in the 5% range is a conservative estimate.

EST DGR

EST INCR

EST NEW DIV

5.26%

$0.01

$0.20

Disclosure: I am/we are long PBA, OTEX. 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.