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Canada’s Newest Dividend Aristocrats (Part 1)

It’s that time of the year. Now that all of Canada’s companies have reported earnings and announced dividends, we have a clear picture of who will be joining Canada’s exclusive list of Dividend Aristocrats. Aristocrats are companies who have grown dividends for at minimum five consecutive years.

Why are Aristocrats so important? The dividend growth strategy is one of the most popular and adopted investing strategies. From millennials to retirees, a dividend growth portfolio is suitable for investors of all stripes. It’s also a strategy that fits well in any account type, whether it be your TFSA, RRSP or non-registered account. Once a company achieves Aristocrat status, it gains a reputation as a reliable dividend growth company. There are many investors who will not consider a company’s dividend growth streak as legitimate until they reach this status.

Once an Aristocrat, they are also added to several Index Funds which increases stock liquidity. Who are Canada’s newest Dividend Aristocrats? Let’s find out!

Slate Retail REIT (TSX:SRU.UN)

Slate Retail is one of two REITs that have extended their dividend growth streaks to five years. Slate’s focus is to acquire, own and lease U.S.-based properties with an emphasis on the grocery sector. As of writing, Slate is yielding a hefty 9.55%, one of the highest yields in the sector.

At first glance, the company’s payout ratio of 164% does not look sustainable. However, for REITs it’s best to look at cash flow. Through the first nine months of fiscal 2018, the company’s payout ratio as a percentage of funds from operations (FFO) was only 66.5%.

Slate has raised its dividend in each year since it first listed on the TSX in 2014. Its five-year dividend growth rate is 3.45%. Notably, Slate pays out its distributions in U.S. dollars.

SmartCentres REIT (TSX:SRT.UN)

SmartCentres joins Slate as the second REIT to have extended its dividend growth streak to a meaningful status. The company owns and manages value-oriented retail centers and counts Walmart among its largest customers.

Like Slate, SmartCentres doesn’t have the highest dividend growth rate (3.2%). However, as the company yield’s over 5.5%, it is still a very attractive income investment. The company’s payout ratio as a percentage of earnings is 86.5% and drops to 81.2% when compared against FFO. Investors can expect continued dividend growth in line with FFO, which has grown by 4.4% on average over the past five years.

Uni Select (TSX:UNS)

This automotive parts manufacturer operates in two main segments: Paint & Related Products and Automotive Products. It distributes automotive refinish and industrial paint and related products and automotive aftermarket parts.

Uni Select’s has a strong earnings profile and its dividend is well covered, accounting for only 25% of earnings. The company has a five-year dividend growth rate of 8.5% and with such a low payout ratio, it has plenty of room for further dividend growth.

Stay tuned for tomorrow’s article that will unveil the next set of dividend growth stocks.

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Fool contributor Mat Litalien has no position in any of the companies listed. 


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