Acadian Timber tops the list of dividend-paying stocks for 2016. (David Ryder/Bloomberg/Getty)
Just as one bad apple can ruin a basket of fruit, one lousy stock can sour a portfolio. The blame for the sub-zero performance of last year’s top 10 dividend payers fell squarely on a single stock, without which this basket would have rewarded investors with a 7% gain. The offender was Torstar Corp., whose shares fell 70%, even when dividends are factored in. With its yield above 7% at this time last year, the warning signs were there.
You won’t find Torstar on our 2016 list, but you will find another media company, Corus Entertainment. Its 9.1% yield is higher than Torstar’s was a year ago. So should you be concerned? Not necessarily.
Before we even look to see which companies on the Investor 500 boast the highest yields, we run our list through several filters. First, we kick out companies with payout ratios above 60%, since at this level investors wisely question whether companies can maintain that payout should earnings take a hit. Second, we only want companies that have a history of dividend growth of at least 5% over the past five years.
Apply those conditions to Corus, and you’ll find its payout ratio is just 24%, the second-lowest of the 10 companies we identify below. While the dividend may not be at risk, it is worth noting that analysts never really warmed to the company’s $2.7-billion acquisition of Shaw Media. So this is a stock that warrants further study.
Investors should also pay close attention to Dorel Industries and Evertz Technologies. Both companies currently have payout ratios edging close to our 60% cut-off. Based on the analyst sentiment, be wary of Dorel. Shares of the furniture maker are currently trading above the consensus target price. Analysts don’t seem to have the same concern about Evertz’s payout ratio, but we still advise checking the stock for bruises before adding it to your fruit bowl.
Even with the drag from Torstar, last year’s batch of dividend stocks handily beat the performance of the S&P/TSX 60, which illustrates two points: There’s merit to the methodology, and a well-constructed portfolio will manage to overcome its disappointments.
| Company | Ticker | Dividend Yield (%) | Dividend Payout Ratio (%) | 5-Yr. Dividend Growth Rate (%) | Beta | Price- to-Book Ratio |
|---|---|---|---|---|---|---|
| Acadian Timber Corp. | ADN | 5.6 | 30.4 | 21.7 | 0.5 | 1.1 |
| Boardwalk REIT | BEI.UN | 4.3 | 21 | 6.1 | 0.8 | 0.8 |
| Canadian Imperial Bank of Commerce | CM | 4.8 | 47.2 | 5.5 | 1 | 1.9 |
| Corus Entertainment Inc. | CJR.B | 9.1 | 24.6 | 11.1 | 0.3 | 0.8 |
| Dorel Industries Inc. | DII.B | 5.1 | 58 | 20.7 | 0.6 | 0.7 |
| Evertz Technologies Ltd. | ET | 4.3 | 55.1 | 13.6 | 0.6 | 3.3 |
| Genworth MI Canada Inc. | MIC | 5.1 | 43.9 | 11 | 1 | 0.9 |
| Laurentian Bank | LB | 4.7 | 43.6 | 8.7 | 1 | 1 |
| Rocky Mountain Dealerships Inc. | RME | 6.8 | 48.4 | 20.6 | 0.9 | 0.8 |
| Royal Bank of Canada | RY | 4.3 | 50.1 | 9.6 | 0.9 | 1.8 |
More from the 2016 Investor 500 Market Guide:
How to position your portfolio for the rest of 2016
Risk-tolerant investors will find opportunities over the next 12 months. The rest of us should keep our heads down
Top 15 Most Profitable Companies
Top 15 Companies by Revenue
Top 15 Companies by Market Cap
Top 15 Companies by Total 5-year Return
Canada’s Top 10 Best Defensive Stocks for 2016
Canada’s Top 10 highest-yielding dividend stocks for 2016
