Companies pay large dividends to attract investors and sometimes high dividends are needed in certain sectors to draw interest. For example, many energy companies that acquire large amounts of debt to operate and expand offer high dividends to encourage investors to purchase the company’s stock.
Therefore, when determining exactly how good a company’s dividend yield really is, it’s best to compare it to the peers in its sector. When compared to their competition, these three companies come out near the top in terms of dividend payments.
1. BCE Inc.
BCE Inc. (TSX: BCE)(NYSE: BCE) is Canada’s largest telecommunications company and pays a quarterly dividend of $0.615 per share, making its current annual dividend yield 5.05%. The company has been paying dividends since the early 198os and has either maintained or increased its dividend since 2000.
But is this reason enough to invest?
BCE has been long known as a traditional phone company in Canada, but rather than stay stuck in the past the company has diversified into other businesses such as wireless and media. In a time where more people have cell phones than landlines, the company’s drive to stay relevant is a positive for the stock.
The company’s second-quarter earnings report showed a 68% increase in Mobile TV year-over-year and wireless operating revenues increased 5.5%, while Bell TV’s subscriber base (Bell Satellite TV and Fibe TV) advanced 6.0% compared to the same time last year.
BCE just recently received Competition Act clearance to complete its previously announced privatization of Bell Aliant (TSX: BA). BCE planned the privatization of Bell Aliant, which it already owns, as a means to free up some cash to grow its business and continue healthy dividend payments. BCE expects the privatization will generate about $100 million in pre-tax annual synergies and annual run-rate free cash flow accretive after common dividends of approximately $200 million a year.
2. Crescent Point Energy Corp
Crescent Point Energy Corp (TSX: CPG)(NYSE: CPG) does not pay the highest dividend in the energy sector, but it is one of the top payers who are not mired in controversy right now. The company pays a monthly dividend of $0.23, making the annual dividend yield 6.34%.
Crescent Point Energy has completed two accretive transactions this year, which is a bullish signal for the company. Crescent Point announced the completion of its acquisition of Saskatchewan Viking oil assets in June and the company revised its average daily production expectations for 2014 to 135,500 boe/d from 134,000 boe/d. It also expects its 2014 exit production rate to increase to 148,000 boe/d from 145,000.
3. Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce (TSX: CM)(NYSE: CM) pays a quarterly dividend of $1.00 per share, which it declared last May. Prior to that the quarterly dividend was $0.98 per share. The current annual dividend yield is 4.02%
CIBC took a hit during the financial crisis and had to take some hefty writedowns, but the company has since emerged from the crisis and the stock has more than rebounded. In fact, CIBC’s stock has been very closely tracing the S&P 500 since the financial crisis, which may have some investors concerned if there is still upside momentum left. In order to continue the rally, there will have to be a catalyst, and one potential catalyst is the company’s new leader.
CIBC selected Victor Dodig, who has been head of the bank’s wealth-management group since 2011, to replace Gerald McCaughey. A new leader could be great for the company, but it would not be good to spook investors by changing things too much, and Dodig has said that the bank’s overall strategy will remain the same under his leadership.
