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Canada’s Newest Dividend Aristocrats (Part 3)

Today we wrap up our look at Canada’s newest Dividend Aristocrats. In case you missed them, be sure to check out part one and part two of this three-part series. There has been quite an interesting mix so far and most seem capable of continuing their dividend-growth streaks well into the future.

Lets take a look at the three companies that round out the list.

Brookfield Real Estate Services (TSX:BRE)

It was only a matter of time before Brookfield Real Estate joined the Aristocrat list. There are, after all, four other Brookfield companies that are Canadian Dividend Aristocrats. Brookfield Real Estate was the lone outlier. Not anymore.

Not to be confused with a real estate investment trust, Brookfield Real Estate provides information and services to realtors and real estate brokers in Canada. It doesn’t own and manage properties; it offers services to those that are in the industry.

Although Brookfield did not raise dividends in 2018, it still paid out more dividends in 2018 than in 2017. As such, it still qualifies for Aristocrat status. This is not uncommon for the company, as it also kept its dividend steady in 2016. Combined with its low history of single-digit dividend growth, I would not consider this to be the safest dividend-growth stock.

Capital Power (TSX:CPX)

Capital Power is a North American regulated utility company. It develops, acquires, owns, and operates power-generation facilities in Canada and the United States. Approximately 82% of the company’s earnings before interest, taxes, depreciation, and amortization are contracted with a long-term average of 14 years. The dividend currently yields more than 6%, which makes it a very attractive play for income investors.

The company’s payout ratio of 229% immediately raises red flags. Don’t pay attention to the headline numbers. Capital Power is expected to generate $360-400 million of adjusted funds from operations. This is more than enough to cover the company’s $182 million worth of yearly dividend payments — hence, the reason why the company raised dividends by 7.2% this past October.

Industrial Alliance Insurance and Financial Services (TSX:IAG)

Industrial Alliance offers a variety of life and health insurance products in Canada. It also provides a variety of financial services including loans and retirement products. The company has been growing its dividend at a rapid pace. Since 2014, the company has averaged double-digit growth.

The company also has plenty of room to extend its streak. Its payout ratio as a percentage of earnings and operating cash flow is only 30.3% at the mid-range of its 30-35% target. In 2019, Industrial Alliance is expected to grow earnings in the high single digits. Given its payout ratio is at the mid-range of guidance, investors can expect the dividend to grow in line with earnings-per-share growth.

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


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