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Canadian Dividend All-Stars: 2019 In Review

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Includes: ACAZF, AMIVF, AWRRF, BREUF, CBYDF, CWSRF, DIIBF, EHMEF, FSV, GWLIF, HLNFF, KRIUF, LSDAF, MLFNF, NFYEF, OR, PAZRF, PEGI, POFNF, PWCDF, QBCAF, QSR, RPKIF, SCCAF, SLF, SNCAF, SUMXF, TRSWF, UNIEF
by: Mat Litalien
Mat Litalien
Value, Growth, macro, long-term horizon
Summary

Weekly series provided accurate predictions of expected dividend increases.

15 companies fell off the All-Star list in 2019.

15 companies became All-Stars going into 2020.

As we begin a new decade, it is time to take a look back on the year that was. Over the past few years, I have been providing weekly updates on Canadian Dividend All-Stars. Like the U.S.'s Dividend Champions list, All-Stars are Canadian stocks listed on the Toronto Stock Exchange that have a history of raising dividends.

To be included on the All-Star list, companies must have raised dividends for at minimum, five consecutive years. It is also important to note, that the record date is used to monitor the streak. This is unlike, the U.S. list, which uses the date in which the dividend was paid as the key reference point.

My series focused on anticipating upcoming dividend increases and subsequently estimating the amount of the increase. Typically, I base my estimates on historical data along with current events and with 2019 behind us, let’s see how the year unfolded.

Dividend Estimates

As mentioned previously, I rely primarily on historical data to anticipate the timing of expected increases and the amount of the dividend increase. Predicting the timing of dividend raises once again proved accurate.

Of those expected to raise dividends, 89% came through with a dividend raise, while 11% failed to announce an increase in 2019. This is a slight dip from 2018, when 92% of companies raised dividends, and only 8% failed to do so.

Despite cross-referencing three different sources for dividend declaration dates and earnings releases, I once again missed about a dozen dividend announcements. On that same note, there were a couple that announced a dividend increase which completely caught me off guard. These are companies who raised multiple times in a year and/or changed the timing of their dividend announcements.

Unfortunately, the dividend growth rate predictions didn’t prove as accurate as in years past. Of those that raised dividends, only 68% raised in-line or above estimates and 32% came in below expectations.

These results are well below the last two years in which estimates were much more accurate. In prior years, an average of 87.5% raised inline or above expectations on only ~12.5% came in below expectations.

In 2019, the average dividend raise by companies on the All-Star list was 8.09% which is reflective of the lower-than-average dividend raise. In comparison, the average raise was 8.70% in 2018 and 8.65% in 2017.

Is slowing dividend growth a warning sign of things to come? It will be interesting to see if the rate of those increasing dividends at a lower-than-expected rate is as high in 2020. Was 2019 an aberration? Only time will tell but it is certainly something to keep an eye on.

Changes to the All-Star List

As is usual, investors said goodbye to several dividend All-Stars. These are companies who either cut, suspended or failed to raise the dividend.

Why does this happen? There are several reasons, but some of the more notable include declining or stagnant revenue and earnings, a more focused growth strategy, being acquired, and high debt-loads.

With that in mind, here is a list of the 15 Canadian Dividend All-Stars that lost their status going into 2020 and the reason for their loss of status:

Company

Symbols

Reason

ZCL Composites

(OTCPK:ZCLCF)[TSX: ZCL]

Acquired

SNC Lavalin

(OTCPK:SNCAF)[TSX:SNC]

Dividend Cut

Dorel Industries

(OTCPK:DIIBF)[TSX: DII.B]

Dividend Cut

High Liner Foods

(OTC:HLNFF)[TSX:HLF]

Dividend Cut

Lassonde Industries

(OTC:LSDAF)[TSX:LAS.A]

Dividend Cut

Plaza Retail REIT

(OTC:PAZRF)[TSX:PLZ.UN]

No Raise

Corby Spirt and Wines

(OTCPK:CBYDF)[TSX:CSW.A]

No Raise

Atrium Mortgage Investment Corp

(OTC:AMIVF)[TSX:AI]

No Raise

Pattern Energy Group

(PEGI)[TSX:PEGI]

No Raise

Supremex

(OTCPK:SUMXF)[TSX:SPX]

No Raise

TransAlta Renewables

(OTC:TRSWF)[TSX:RNW]

No Raise

Bridgemarq Real Estate Services

(OTCPK:BREUF)[TSX:BRE]

No Raise

Osisko Gold Royalties

(OR)[TSX:OR]

No Raise

Richards Packaging

(OTC:RPKIF)[TSX:RPI.UN]

No Raise

Uni-Select

(OTC:UNIEF)[TSX:UNS]

No Raise

*Of note, Atrium Mortgage Investment Corp may still deserve dividend growth status. It all depends on your definition of dividend growth. The Canadian Dividend All-Star list is based on record date and not the payout date. This is unlike David Fish’s CCC list that focuses on dividends paid in a calendar year. Atrium paid out more in 2019 than in 2018 and as such, could still be considered a dividend growth stock.

Now that we got the bad news out of the way, there are plenty of new Canadian Dividend All-Stars to consider in 2020. Here are the 15 additions to the All-Star list that have reached five consecutive years of dividend growth:

Company

Symbols

A&W Revenue Royalties Income Fund

(OTC:AWRRF) [TSX:AW.UN]

Acadian Timber

(OTCPK:ACAZF)[TSX:ADN]

Chartwell Retirement Residences REIT

(OTC:CWSRF)[TSX:CSH.UN]

FirstService Corp

(FSV)[TSX:FSV]

Goeasy Ltd

(OTCPK:EHMEF)[TSX:GSY]

Great-West Lifeco Inc

(OTCPK:GWLIF) [TSX:GWO]

NFI Group

(OTCPK:NFYEF)[TSK:NFI]

Maple Leaf Foods Inc

(OTCPK:MLFNF)[TSX:MFI]

Power Corporation of Canada

(OTCPK:PWCDF)[TSX:POW]

Power Financial Corp

(OTCPK:POFNF)[TSX:PWF]

Quebecor Inc

(OTC:QBCAF)[TSX:QBR.B]

Restaurant Brands Internationals

(QSR)[TSX:QSR]

Sleep Country Canada

(OTC:SCCAF)[TSX:ZZZ]

Stingray Digital Group Inc

[TSX:RAY.A]

Sunlife

(SLF)[TSX:SLF]

Of note, FirstService Corp, Restaurant Brands International and Sunlife are dual listed. Investors can buy them on both the major U.S., and Canadian exchanges.

It is also worth noting that Power Financial Corp is being acquired by parent company Power Corporation. The deal is expected to close in late February and as such, its place on the All-Star list will be short lived.

Looking Forward to 2020

As you can see by the number of All-Stars that lost their status, there is no guarantee that companies will continue to raise dividends. However, the Canadian Dividend All-Star list provides Canadian dividend growth investors with a great starting point.

Likewise, investors should pay close attention to those on the verge of becoming All-Stars. The 15 added to the list in 2020 is the second-most ever added in a single year. Of those sitting on four years, only one – Keg Royalties Income Fund (OTC:KRIUF)[TSX:KEG.UN] – failed to graduate to the All-Star list.

Once again, there are quite a few intriguing additions to the list this year. Case in point, goeasy (OTCPK:EHMEF)[TSX:GSY] has long been a favourite of mine and has one of the highest dividend growth rates (+20%) on the list. Since I recommend it last December, goeasy’s stock price has more than doubled (+136%).

Interestingly, there are also three new All-Stars who are prominent fixtures in the Small Cap Triple-Threat portfolio – the aforementioned goeasy, Sleep Country Canada and Stingray Digital Group. Plenty to digest to start the year.

I look forward to continuing my series throughout 2020. I hope you find my coverage of the Canadian All-Stars of value and if there is anything further you would like to see that would enhance the series, please drop me a note in the comment section below. Best of luck in 2020!

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Disclosure: I am/we are long EHMEF, TRSWF, POFNF. 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.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.