Dividend-paying stocks have outperformed their non-paying counterparts over the past 30 years. But even more impressive is the track record of companies that have increased their dividend payouts over that period.
With that in mind, the real focus for investors becomes what companies to buy?
Fortunately, Chad McAlpine, quantitative analyst at RBC Capital Markets, has done the hard work and identified those stocks that have a better-than-average probability of raising their dividends in the coming years.
S&P/TSX composite and S&P 500 stocks were screened for having the capacity to increase their dividends, with projected payouts on estimated earnings ratios less than 50%.
The second criteria is a history of consistent dividend hikes – specifically, having increased distributions in each of the past five years and current indicated annual dividends being greater than 12-month trailing dividends.
Thirdly, companies must have an incentive to raise their dividends. Therefore, stocks must have estimated payout ratios no greater than 5% above their current trailing payout ratios.
Now for the stocks…
There were 80 S&P 500 companies listed as potential dividend growth candidates, while 16 TSX-listed names made the cut. They include:
Rogers Communications Inc.
Intact Financial Corp.
CCL Industries Inc.
ATCO Ltd.
Toromont Industries Ltd.
Saputo Inc.
Canadian National Railway Co.
Metro Inc.
Home Capital Group Inc.
Empire Co. Ltd.
Cogeco Cable Inc.
Tim Hortons Inc.
SNC-Lavalin Group Inc.
Suncor Energy Inc.
ShawCor Ltd.
Canadian Natural Resources Ltd.