Canada’s Newest Dividend Aristocrats

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) and Innergex Renewable Energy Inc. (TSX:INE) announced their fifth raise in as many years.

| More on:

Dividend-growth investors look to invest in companies with track records of raising their dividends. In the U.S., investors look to David Fish’s dividend champions list as the model of consistency. Dividend champions are those companies that have raised dividends for 25 straight years. The U.S. list is further broken down into “contenders” — those with streaks between 10 and 24 years — and “challengers” — whose streaks span five to nine years.

In Canada, there is a single dividend aristocrat list. The list includes all TSX-listed companies that “have followed a policy of consistently increasing dividends every year for at least five years.” Two companies raised dividends this past quarter and have unofficially achieved the aristocrat status. I say unofficially because they need to pay out their dividend in full for the duration of 2018 prior to becoming an official member.

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) raised its dividend by 7.8% on February 28, 2018. The raise marks the fifth consecutive year that the company announced an increase to its dividend. Over the course of its streak, it has had a healthy compound annual dividend growth rate of 9.5%, and its stock currently yields 3.71%.

Manulife is an interesting case. Dividend-growth investors may be a little hesitant as the company has a spotty history. The company is a former aristocrat, having announced 11 dividend raises between 1999 and 2008 before slashing its dividend in half during the financial crisis. Manulife left its dividend unchanged for 21 straight quarters until finally returning to dividend growth in the second quarter of 2014. Those invested in the company just prior to the cut would still be realizing less dividends today, approximately nine years later.

Its current quarterly dividend of $0.22/share is still 18% shy of its pre-financial crisis dividend of $0.26/share. The good news is that Manulife is in much better shape today with a reasonable 44% payout ratio, which gives ample room for further growth. In comparison, prior to the dividend cut its payout ratio stood at an unsustainable 312%.

A new entry on the list is Innergex Renewable Energy Inc. (TSX:INE). Innergex raised dividends by 3% on February 21, 2018. Its five-year compound annual dividend-growth rate is 2.6%, and its stock currently yields 5.18%.

Innergex IPO’d in 2008 and is a new player on the dividend-growth scene. It first paid a dividend in 2010 and began its dividend-growth streak with its first dividend raise in 2014. Although its low single-digit dividend-growth rate is nothing to get excited about, it has a juicy starting yield, which makes it an attractive option for income investors. The company’s payout ratio as a percentage of free cash flow has decreased year over year, which bodes well for future dividend increases.

Credibility and liquidity

One benefit of achieving dividend aristocrat status is the added liquidity once the stock is added to the many funds that track the Canadian Dividend Aristocrat Index. It also adds a level of legitimacy to the company’s dividend-growth streak, and the company will begin to show up on more dividend screeners, further improving the stock’s visibility. Investors would be wise to get in now before Manulife and Innergex receive official aristocrat status.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien is long Manulife Financial Corp.   

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »