The oil rout has hammered many of Canada’s former dividend darlings, and investors can be forgiven for feeling a bit nervous about buying in the current environment.
Fortunately, there are still names out there with reliable and growing dividends that should be rock solid for decades to come.
Telus has very few serious competitors and operates in a market with high barriers to entry. Consumers might complain about the lack of competition, but shareholders are all smiles.
The company is an attractive pick in the sector because it places a high value on customer service, and the strategy appears to be paying off. Telus regularly posts the lowest mobile churn rate in the industry, and its loyal customers continue to spend more money.
In fact, Telus has racked up 21 consecutive year-over-year quarterly increases in its blended average revenue per user.
Investors have been worried that new pick-and-pay rules for TV subscriptions will have a negative impact on content producers and service providers. Telus doesn’t have a media division, so it isn’t at risk on the content side. As for subscription revenues, I suspect most Canadians will end up paying close to their previous budget.
Telus has an aggressive share-buyback program and raises its dividend every year. The current quarterly distribution of $0.44 per share yields 4.25%.
Bank of Nova Scotia
Investors often pass over Bank of Nova Scotia in favour its two larger peers, but that decision might be a mistake.
The company is Canada’s most international bank with full-service operations in more than 30 countries. Most of the foreign investment has been focused on Latin America, with Mexico, Colombia, Chile, and Peru being the main markets.
You might think this is an odd combination, but the four countries form the core of the Pacific Alliance, a trade bloc set up to provide free movement of capital and goods among the member states. The group has already integrated the four stock markets and more than 90% of tariffs have been eliminated.
Bank of Nova Scotia now has a solid position in each market and is poised to benefit as trade increases. The retail opportunities are also compelling as the growing middle class demands car loans, credit cards, lines of credit, and investment products.
Net income from the international group in fiscal Q1 2016 was $505 million, up 21% compared with the same period last year.
The company just raised its quarterly dividend to $0.72 per share. That’s good for a yield of 4.6%.