Canadian Dividend All-Stars Expected To Announce Dividend Increases - Week Of May 6

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Includes: AQN, FINGF, FNV, LBLCF, ONEXF, OTEX, PBA, TU, WNGRF
by: Mat Litalien
Summary

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

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

All three All-Stars from last week came through for investors.

This coming week will be one of the busiest of the year for Canadian Dividend All-Stars. In total, there are half a dozen All-Stars that are expected to announce a dividend raise. Before we get into the upcoming week, let’s first take a look at what transpired last week. Of note, all figures are in Canadian dollars unless otherwise noted.

Last Week’s Results

Last week unfolded largely as expected. Loblaw Companies (OTCPK:LBLCF)[TSX:L], Open Text (OTEX)[TSX:OTEX] and Pembina Pipeline (PBA)[TSX:PPL] all announced their annual dividend raises.

EST

DGR

EST

Increase

ACTUAL

DGR

ACTUAL

Increase

NEW

DIV

Loblaws

8.47%

$0.025

$0.02

6.78%

$0.315

Open Text*

10.01%

$0.0153

$0.0228

15.02%

$0.1746

Pembina Pipeline

5.26%

$0.01

$0.01

5.26%

$0.20

*Open Text pays out its dividend in U.S. dollars

First, let’s start with Loblaws. After a surprise raise last year, Loblaws followed up with a raise that was slightly lower than expected. The company raised dividends by $0.02 per share, or 6.78% for a new quarterly payout of $0.315 per share.

After years of predictable dividend growth, last week I warned that Open Text could announce a raise lower than historical averages. A declining growth rate was brought forward as a viable reason for slowing dividend growth.

However, I was proven wrong. Open Text raised dividends by 15%, which is right in line with historical averages. It did so on the back of a strong earnings, where it grew adjusted EBITDA by 15% year over year. As an Open Text shareholder, I was more than happy to be on the wrong side of this prediction.

Pembina Pipeline, for its part, raised dividends by an as expected 5.26 per cent. The company’s penny per share raise results in a new monthly payout of $0.20 per share.

Expected Increases

George Weston (OTCPK:WNGRF)[TSX:WN]

  • Current Streak: 7 years
  • Current Yield: 2.14%
  • Earnings: Tuesday, May 7

What can investors expect: George Weston, parent company to Loblaws, has a very similar dividend pattern as its subsidiary. It has a seven-year growth streak and typically announces a raise along with first-quarter results.

George Weston has an inconsistent dividend growth pattern. That being said, it has averaged around 5% growth since its dividend growth streak began. Last year, the company rose dividends by 5.10% and investors can expect similar this year.

EST DGR

EST INCR

EST NEW DIV

5.83%

$0.04

$0.545

Franco-Nevada (FNV)[TSX:FNV]

  • Current Streak: 11 years
  • Current Yield: 1.29%
  • Earnings: Wednesday, May 8

What can investors expect: Franco-Nevada is one of the few reliable precious metal dividend growth companies. Like clockwork, the company has raised dividends along with first-quarter results. Of note, Franco-Nevada is dual-listed and pays out its dividend in U.S. dollars.

Since 2015, the company’s annual raise has been exactly a penny a share. Not surprisingly, this has led to a declining growth rate. As of writing, the company’s payout ratio sits at 95%, which is an immediate red flag.

The company also has negative free cash flow which means that dividends are currently being supported by external financing. Given this, I don’t expect the company to deviate from its dividend pattern.

EST DGR

EST INCR

EST NEW DIV

4.17%

$0.01

$0.25

Finning International (OTCPK:FINGF)[TSX:FTT]

  • Current Streak: 17 years
  • Current Yield: 3.33%
  • Earnings: Wednesday, May 8

What can investors expect: Finning International is a leading distributor and marketer of Caterpillar (NYSE:CAT) products. At 17 years, it also has one of the longest dividend growth streaks in Canada. The company, however, has a very inconsistent dividend pattern. As of writing, it has kept its dividend steady for four straight quarters. However, it is not uncommon for the company to extend its period of dividend stagnation beyond a year.

Since it has an inconsistent dividend pattern, Finning’s historical growth rates also vary. Last year, the company raised by a penny (5.26%) and I would not expect much difference this year.

EST DGR

EST INCR

EST NEW DIV

5.00%

$0.01

$0.21

Telus Corp. (TU)[TSX: T]

  • Current Streak: 15 years
  • Current Yield: 4.42%
  • Earnings: Thursday, May 9

What can investors expect: Telus, one of the Big Three telecom providers, is one of the most attractive income options on the TSX. It has a clear dividend policy and has a history of raising dividends bi-annually. Once with first-quarter results and again in the third quarter.

Telus aims to raise dividends by 7-10% annually through the end of 2019. It is worth noting that the company has had a clear dividend policy for the better part of the past decade. Not once has it failed to meet its targeted growth rate.

Assuming Telus continues to raise twice a year, the raises in 2019 should be between 3.5% and 5%.

EST DGR

EST INCR

EST NEW DIV

3.67-5.00%

$0.02-0.025

$0.565-0.57

Algonquin Power & Utilities (AQN)[TSX:AQN]

  • Current Streak: 8 years
  • Current Yield: 4.47%
  • Earnings: Thursday, May 9

What can investors expect: A reliable dividend payer, Algonquin Power is less so when it comes to the timing of its dividend raise. That being said, last year it reverted to its previous pattern and raised dividends along with first-quarter results in early May. Of note, Algonquin pays out its dividend in U.S. dollars.

Much like Telus, Algonquin has a clear dividend policy. It expects operational performance to sustain a 10% dividend growth rate through 2022. Convincingly, the company’s last two dividend raises were 10 per cent. There is no reason to expect any difference in 2019.

EST DGR

EST INCR

EST NEW DIV

10.06%

$0.0129

$0.1422

Onex Corp. (OTCPK:ONEXF)[TSX:ONEX]

  • Current Streak: 6 years
  • Current Yield: 0.44%
  • Earnings: Friday, May 10

What can investors expect: Onex is an asset management company that has relied on acquisitions to drive growth. Since its six-year dividend growth streak began, it has consistently raised dividends in May.

Onex’s dividend is nothing to get excited about as it only yield’s 0.44 per cent. This is not surprising as the company is a growth through acquisition company, which is at odds with a dividend growth strategy. That being said, the company has average double-digit dividend growth.

The company’s last raise was 16.67%; however, it has had a tough 2018. Operationally, it has not delivered on internal targets and management has admitted to poor execution. Will that impact its dividend growth rate? It’s quite possible.

Onex has negative earnings and dividends account for 103% of free cash flow. Admittedly, it is incredibly difficult to predict what the company will do in 2019. I’ll be conservative and estimate that if it does announce a raise, it will be at the low end of historical averages.

EST DGR

EST INCR

EST NEW DIV

8.57%

$0.0075

$0.095

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