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Canadian Dividend All-Stars Expected To Announce Dividend Increases - Week Of Oct. 28

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Includes: BAM, CGEAF, CGECF, FNLIF, GMICF, GNW, TFIFF, WCN
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.

Five All-Stars are expected to raise dividends this coming week.

Last week, TFI International came through with its ninth consecutive yearly dividend increase.

After our first dividend raise in a month, the momentum continues as this week will be one of the busiest of the year thus far. There are several Canadian All-Stars expected to announce earnings and of those, five are due to announce a dividend raise. First, let’s recap what happened last week. Of note all figures are in Canadian dollars unless otherwise noted.

Last Week – Results

It was a simple week as TFI International (OTCQX:TFIFF)[TSX:TFII] came through with its annual dividend raise last Thursday.

EST

DGR

EST

Increase

ACTUAL

DGR

ACTUAL

Increase

NEW

DIV

TFI International

12.50%

$0.03

$0.02

8.33%

$0.26

TFI International’s 8.3% dividend raise is nothing to scoff at but it was lower than expected. It raised dividends by two cents for a new quarterly rate of $0.26 per share. With the raise, it extended its growth streak to nine years.

The miss was in large part to results that pointed to slowing growth. The company posted earnings of $1.04 per share, missing expectations by $0.02. This quarter was expected to be the slowest of the year in terms of growth, but it still came up short.

Looking forward, analysts estimate earnings growth in the low teens over the next few quarters.

Expected Dividend Increases

Waste Connections (WCN)[TSX:WCN]

  • Current Streak: 9 years
  • Current Yield: 0.71%
  • Earnings: Monday, October 28

What can investors expect: One of North America’s largest waste disposal companies, Waste Connections is on the verge of reaching an important milestone – a dividend growth streak that spans a decade. Since the company is dual listed, this also means it will achieve Dividend Contender status in the U.S.

Waste Connections has reliably raised dividends along with third quarter results. Of note, the company also pays out its dividend in U.S. funds.

Over the course of its streak, Waste Connections has averaged approximately 16% dividend growth. Last year, it raised dividends by 14% or $0.02 per share. The two-cent raise was inline with its raise from the previous year.

Since the company’s earnings growth rate is expected to be in the single digits over the next few years, it is reasonable to assume that dividend growth will continue slowing. That being said, it has a low payout ratio (~30%) and still has plenty of room to grow the dividend by double-digits. I expect a raise inline with last year’s two-cent raise.

EST DGR

EST INCR

EST NEW DIV

12.50%

$0.02

$0.18

Genworth MI Canada (OTCPK:GMICF)[TSX:MIC]

  • Current Streak: 10 years
  • Current Yield: 3.88%
  • Earnings: Tuesday, October 29

What can investors expect: Genworth Canada is the largest private-sector mortgage insurer in the country. It has reliably raised dividends along with third quarter earnings.

Over the past ten years, Genworth has consistently raised dividends in the mid-to-high single-digit range. Typically, I would expect more of the same this year.

However, Brookfield Asset Management (BAM)[TSX:BAM-A] currently has a deal in place to purchase a majority stake in the company (57%) from Genworth Financial (GNW). The deal which is valued at $2.4 billion is expected to close by the end of the year. Although no plans are in place for the company to buy out the remaining 43% public stake, it may have an impact on whether or not Genworth Canada raises its dividend.

The company has already announced two special dividends since the deal was announced. This is out of the norm for the company. It may be the Genworth’s short-term strategy as it awaits final regulatory approval on the deal.

EST DGR

EST INCR

EST NEW DIV

7.84%

$0.04

$0.55

First National Financial Corp (OTCPK:FNLIF)[TSX:FN]

  • Current Streak: 7 years
  • Current Yield: 4.97%
  • Earnings: Wednesday, October 30

What can investors expect: First National Financial has a spotty dividend history and no reliable pattern. That being said, the company last raised dividends a year ago.

It is also worth noting that in 2017 and 2018, this monthly dividend payer also announced a special dividend along with third quarter earnings.

The company’s dividend raise is typically in the low, single digits. First National’s last dividend raise was a mere 2.7% although it was accompanied by a special dividend of $1.00 per share.

Investors shouldn’t expect anything more than low-single digit growth if the company announces a dividend raise. It is a big “if” considering it has no discernable dividend raise pattern. Given recent history, a special dividend announcement is more likely.

EST DGR

EST INCR

EST NEW DIV

2-3%

$0.04-$0.05*

$1.94-1.95*

*Reflected as an annual payout.

Cogeco Communications Inc (OTCPK:CGEAF)[TSX:CCA]

  • Current Streak: 15 years
  • Current Yield: 1.98%
  • Earnings: Wednesday, October 30

Cogeco Inc (OTC:CGECF)[TSX:CGO]

  • Current Streak: 14 years
  • Current Yield: 1.76%
  • Earnings: Wednesday, October 30

What can investors expect: Cogeco Communications and Cogeco typically move in lockstep with each other. They are scheduled to release earnings next Wednesday and have consistently raised dividends along with fourth quarter results.

Historically, the companies had a divergent dividend growth rate. Cogeco Inc’s dividend growth rate has typically been slightly higher than Cogeco Communcations. Over the years that gap has narrowed and last year they both raised dividends by just over 10%.

Moving forward, I expect them to raise inline with each other. Albeit slowing, it is worth noting that both companies have maintained double-digit dividend growth rates over the course of their streaks. There is room to keep that streak going, however it is possible that growth rates dip into the single digits.

I flag this because expectations for earnings growth are muted over the next couple of years. For now, I’ll be an optimist recognizing full well dividend growth could underwhelm.

EST DGR

EST INCR

EST NEW DIV

CCA - 10.48%

$0.055

$0.58

CGO – 10.47%

$0.045

$0.475

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Disclosure: I am/we are long TFIFF. 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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