You can stop hunting for yields and simplify the process by focusing on the dividend all-stars or the Canadian companies that have increased the dividend for five or more calendar years in a row.
One small bank — one monster dividend machine
Canadian Western is a tiny bank but a monster when it comes to dividend payments. This $2.91 billion provider of personal and business banking products in Western Canada has a dividend streak of 27 years.
This small bank generates stable profits like a big bank. Canadian Western is on track to improve its 2018 fiscal year revenue by 5.72% and net income by 7.39%. Performance-wise, the gain of the stock so far this year is 31.51%. The growth estimate for 2020 is 6.3%.
As a regional bank, it holds no dominant industry position. But over the last few years, Canadian Western has maintained low loan losses despite high exposure to the mortgage market.
The stock pays a dividend of 3.38% with a low payout ratio of 35.45%. If Canadian Western performs true to form as projected, the dividend can increase in the coming years.
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Finning has yet to post gains this year, although it has managed to trim down losses to 4.35% as of this writing. This $3.62 billion heavy equipment company is underperforming because of the general weakness of the sector rather than profitability issues.
Based on the current run rate, the company is poised to end 2019 with a 7.83% increase in revenue versus 2018 but with a 15.5% decrease in net income due to the lower gross margins. In any case, next year’s growth estimate is 12.9% with a potential bounce-back of 19.3% annually for the next five years.
Finning has been operating since 1933 and is in the business of selling, servicing, and renting heavy equipment, engines, and related products in Canada. It also serves the markets in South America, Ireland, and the United Kingdom. Clients are in various industries, including mining, and construction, among others.
Its dividend streak of 17 years makes Finning a dividend all-star. The 3.73% yield is safe, so you can also expect a stable income stream in the 17 years.
Telus, the third-largest telecom provider in Canada, is a practical choice of dividend investors. Apart from being a recession-proof stock, it has been paying dividends for 15 consecutive years.
The total return on a $10,000 investment made 20 years ago is 530.56%, including reinvestment of dividends. With Telus’ yield of 4.9%, your gains could be higher.
Telus is suited to low-risk investing appetites. It offers safety and capital preservation. The dividends are safe even if this telecom provider maintains a single-digit annual growth in the next five years.
A growth catalyst is coming in 2020 with the commercial launch of the mobile 5G. According to Telus, Vancouver would be the first to experience the most cutting-edge wireless technology in the world. Canadians can access the internet 10 times faster with 5G.
Dividend all-stars can significantly improve your financial standing. Cut to the chase and limit your choices to Canadian Western, Finning, and Telus, all of which are long-time partners of dividend investors.
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 Christopher Liew has no position in any of the stocks mentioned. Finning is a recommendation of Stock Advisor Canada. Finning International is a recommendation of Stock Advisor Canada.