July 30th, 2011 | 
Category: With the recent turmoil in the economy south of the border and the sell out on the North American stock markets, I thought I’d highlight the Top 20 Dividend Stocks as per my tracking list. My May 2011 Edition generated some good conversation and I am actually quite interested to see how different the list is. I don’t always look at the top 20 to make purchases since I need to ensure I have proper diversification of my portfolio.
The Top 20 Dividend Stocks are based on my technical screening and the dividend yield. I watch about 100 stocks between the Canada and the US and I update my list as I find others that I believe worthy of being on my watch list. I have about 7 sectors on my watch list and I usually keep 6 to 12 stocks in each. The list is quite varied as it is composed of REITs, Income Trust and Companies with either small, medium or large caps.
Top 20 Dividend Stocks – Technical Screening
The technical screening is based on 4 criteria that I can easily fetch from Google Finance. I have not had the time to do more data entry since the last time so I have the same computed technical screening. I would really like to add dividend growth to it when I have time along with the debt to equity ratio.
- P/E : Target is 15
- 52 Week Range : The lower in the range the higher the score
- Yield : Target is above 3% (this one is manual)
- Payout Ratio : Under 75%
| Ticker | Name | Stock | Market Cap. | Yield | Score Max. 6 |
|---|---|---|---|---|---|
| JE.TO | Just Energy | $13.6 | 1.87 | 9.12% | 6 |
| SLF.TO | Sun Life Financial | $26.41 | 15.27 | 5.45% | 5.92 |
| COS.TO | Canadian Oil Sand | $26.11 | 12.66 | 4.6% | 5.85 |
| LB.TO | Laurentian Bank | $42.86 | 1.03 | 3.92% | 5.81 |
| CM.TO | CIBC | $72.98 | 28.97 | 4.77% | 5.42 |
| RY.TO | Royal Bank | $51.4 | 73.77 | 4.2% | 5.34 |
| POW.TO | Power Corporation | $25.35 | 10.42 | 4.58% | 5.33 |
| T | AT&T | $29.26 | 173.37 | 5.88% | 5.31 |
| PWF.TO | Power Financial | $28.19 | 19.96 | 4.97% | 5.24 |
| RSI.TO | Rogers Sugar | $5.34 | 0.47 | 6.37% | 5.23 |
| CPB | Campbell Soup | $33.05 | 10.61 | 3.39% | 5.23 |
| LMT | Lockheed Martin Corp. | $75.73 | 25.42 | 3.96% | 5.22 |
| BNS.TO | Scotia Bank | $54.18 | 58.64 | 3.84% | 5.16 |
| GWO.TO | Great West Life | $23.87 | 22.65 | 5.19% | 5.08 |
| HSE.TO | Husky | $26.75 | 25.38 | 4.49% | 4.98 |
| LLY | Lilly | $38.3 | 44.34 | 5.12% | 4.97 |
| WM | Waste Management | $31.49 | 14.93 | 3.94% | 4.95 |
| TA.TO | TransAlta | $21.13 | 4.69 | 5.38% | 4.95 |
| REF.UN | Canadian REIT | $33.37 | 2.23 | 4.14% | 4.94 |
| PEP | Pepsi Co | $64.04 | 101.35 | 3.22% | 4.92 |
These are not stock recommendations. It is simply a sorted list based on mathematical screening. It’s just an initial step to further look into an investment that matches the criteria I am looking for. What I like about this list is that it can highlight an entry point.
In my May 2011 listing, Rogers Communication (RCI.B) was at the top of the list and Just Energy was missing from it. In the span of 2 months, the top of the list changed. Only 12 of the companies are the same between May and July.
At the time of writing, I have positions in SLF, CM, RY, AT&T, PWF, BNS and TA
[Update] Following a discussion with Dividend Ninja, I have added a table with the Payout Ratio under 60% and I have extended the list to the top 25 just to see how different it is. That’s the thing with numbers, it’s information that helps you make your own decision. There is no such thing as a list where you can just pick the stocks from the top of the list.
You’ll notice that one stock has a greater than 60% Dividend Payout Ratio (DPR). That’s because its score is surfacing it based on all the other values. Even if I set the max DPR to 60%, I don’t exclude them, they simply get a lesser value in the score. It’s an important differentiation as my list is not the entire stock market but companies I would possibly be happy to hold or that I am researching. To that end, I don’t eliminate them but simply assign a lower score and it takes into consideration the market fluctuations and the scenario where a good company had a temporary higher DPR (which requires further investigation as to why).
Valener (VNR) is the outlier. Is it a bad high yield stock? I don’t think so since it’s a utility partly owned by Enbridge. Valener was previously Gaz Metro. In the post I did on GZM.UN prior to the conversion, I presented the ownership structure. That’s why I find it important to not filter out the stocks but to score them. However, you probably won’t see dividend growth so it really depends on what you are looking for and your investment timeline.
| Ticker | Name | Stock | Market Cap | Beta | Yield | Payout Ratio | Score Max. 6 |
|---|---|---|---|---|---|---|---|
| JE.TO | Just Energy | $13.6 | 1.87 | 0.59 | 9.12% | 36.58% | 6 |
| LB.TO | Laurentian Bank | $42.86 | 1.03 | 0.19 | 3.92% | 35.29% | 5.81 |
| SLF.TO | Sun Life Financial | $26.41 | 15.27 | 1.16 | 5.45% | 51.99% | 5.63 |
| COS.TO | Canadian Oil Sand | $26.11 | 12.66 | 0.75 | 4.6% | 50.42% | 5.56 |
| LMT | Lockheed Martin Corp. | $75.73 | 25.42 | 0.97 | 3.96% | 39.74% | 5.22 |
| CM.TO | CIBC | $72.98 | 28.97 | 0.96 | 4.77% | 55.86% | 5.16 |
| RY.TO | Royal Bank | $51.4 | 73.77 | 0.79 | 4.2% | 56.54% | 5.08 |
| CPB | Campbell Soup | $33.05 | 10.61 | 0.29 | 3.39% | 46.28% | 5.03 |
| T | AT&T | $29.26 | 173.37 | 0.67 | 5.88% | 52.12% | 5.02 |
| RSI.TO | Rogers Sugar | $5.34 | 0.47 | 0.37 | 6.37% | 51.52% | 4.94 |
| REF.UN | Canadian REIT | $33.37 | 2.23 | 0.38 | 4.14% | 37.3% | 4.94 |
| BNS.TO | Scotia Bank | $54.18 | 58.64 | 0.82 | 3.84% | 47.17% | 4.93 |
| AX.UN | Artis REIT | $13.89 | 1.05 | 1.07 | 7.78% | 41.38% | 4.84 |
| LLY | Lilly | $38.3 | 44.34 | 0.77 | 5.12% | 46.01% | 4.77 |
| TA.TO | TransAlta | $21.13 | 4.69 | 0.57 | 5.38% | 58.91% | 4.7 |
| PEP | Pepsi Co | $64.04 | 101.35 | 0.55 | 3.22% | 52.42% | 4.64 |
| BMO.TO | Bank of Montreal | $60.03 | 34.20 | 0.83 | 4.66% | 55.89% | 4.64 |
| RCI.B | Rogers | $36.48 | 19.94 | 0.5 | 3.89% | 56.57% | 4.62 |
| PG | Procter & Gamble | $61.49 | 172.22 | 0.52 | 3.12% | 50.53% | 4.61 |
| TD.TO | TD Bank | $76.49 | 67.78 | 0.87 | 3.45% | 47.91% | 4.6 |
| INTC | Intel Corporation | $22.33 | 118.39 | 1.12 | 3.25% | 33.25% | 4.56 |
| NA.TO | National Bank | $74.05 | 12.02 | 0.52 | 3.84% | 43.69% | 4.55 |
| AFL | Aflac | $46.06 | 21.51 | 1.75 | 2.61% | 31.5% | 4.24 |
| VNR.TO | Valener | $16.21 | 2.05 | 0.19 | 6.17% | 76.34% | 4.21 |
| REI.UN | RioCan | $25.96 | 6.80 | 0.69 | 5.32% | 57.74% | 4.19 |
Top 20 Dividend Stocks – Dividend Yield
Since I was compiling the list above, I thought I’d share the highest paying stock on my watch list so you can see the difference between simply looking at yield versus other elements. The yield by itself can be an indicator to look further into an investment but by itself, it should not signal a purchase.
I have purposely excluded REITs from this list except for. The yields are usually high for many of them and I did not feel they belonged with the others. When there isn’t a score, it’s because the P/E is negative.
| Ticker | Name | Stock | Market Cap. | Yield | Score Max. 6 |
|---|---|---|---|---|---|
| JE.TO | Just Energy | 13.6 | 1.87 | 8.82% | 6.00 |
| PBH.TO | Premium Brands Holding Corp | 15.36 | 0.28 | 7.55% | 3.32 |
| KEG.UN | The Keg Royalty Income Fund | 13.2 | 0.15 | 7.27% | 3.43 |
| ERF.TO | Enerplus Corp | 29.79 | 5.33 | 7.25% | 2.22 |
| LIQ.TO | Liquor Store Income Fund | 15.02 | 0.34 | 7.19% | 4.00 |
| BA.TO | Bell Alliant | 27.7 | 6.31 | 6.93% | - |
| RSI.TO | Rogers Sugar | 5.34 | 0.47 | 6.74% | 5.23 |
| DAY.TO | Daylight Energy | 9.16 | 1.95 | 6.55% | - |
| CPG.TO | Crescent Point Energy | 42.95 | 11.62 | 6.43% | - |
| KMP | Kinder Morgan Energy | 70.49 | 22.48 | 6.30% | 3.18 |
| IPL.UN | Inter Pipeline | 15.53 | 4.02 | 6.18% | 3.08 |
| PPL.TO | Pembina Pipeline | 25.24 | 4.22 | 6.18% | 2.31 |
| VNR.TO | Valener | 16.21 | 2.05 | 6.17% | 4.21 |
| AGF.B | AGF Management | 17.38 | 1.66 | 5.98% | 3.61 |
| T | AT&T | 29.26 | 173.37 | 5.88% | 5.31 |
| CINF | Cincinnati Financial Corp | 27.33 | 4.46 | 5.85% | 3.99 |
| LEG | Legget & Plat | 21.7 | 3.10 | 5.71% | 3.62 |
| BCE.TO | BCE | 36.46 | 28.23 | 5.70% | 3.31 |
| MBT.TO | Manitoba Telecom | 30.97 | 2.03 | 5.55% | 3.21 |
Remember how Yellow Media (YLO) was on the list back in May, well it’s gone from my watch list now. I never owned it and it’s struggling with their transformation as a media company. It does currently pay 31.27% in dividend. The stock recently got destroyed but the board of director continues to approve the monthly dividends. Transforming a company takes quite a bit of time. I wish them luck but I’ll be watching on the sideline.
Interestingly enough 17 of the 20 listed in the sorted yield list appear on the May 2011 edition. The order is slightly different but it is interesting to see that even in the current economic situation the high yield stocks remain unchanged.
I currently own LIQ, BCE, CPG and AT&T
Thoughts
I was hoping to see a difference in my value list as it should be influenced by the stock price drops that we have seen in the markets. However, I was surprised to see the high yield list not change much. The order changed but the high yield stocks remain high yield. Is there a pattern between high yield versus dividend growth stocks? Aside from T, KMP and BCE, the high yield stocks are relatively small companies in market capitalization compared with my value list above. It would seem that high yield stocks tend to appear with smaller companies (more risk I guess). Any thoughts?
Next time, I want to have dividend growth in my criteria. It’s going to show a different picture.
Readers: What do you think of the lists?
Disclamer: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your decision at your own risk – see my full disclaimer for more details.
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Nice post about the screens.
Not really surprised by the data, lots of former trusts in the yield screen. This reinforces with me that chasing yield is a riskier play. I see a few more of my favourite types of stocks, the “buy and hopefully hold forever stocks” in the technical screen.
That works for me and my investment strategy
I put more weight in my technical screening to highlight out of favor stocks. The yield list is really just that but as you said, lots of former income trust. My question is, do you count them out? or do you assume they can come back as dividend growth corporation? and how long do you wait?
The interesting thing about the Income Trust is that many companies were switching to become trust from a tax benefit perspective and now that the benefit is gone, they will be behaving as corporation. Will they remain simply high yield stocks? or will they start managing the DPR and provide dividend growth?
Thanks for the comment!
PIE, great job on the lists!
I am less inclined now to invest in high-yield stocks, than I was say a year ago. And I also think that keeping the Dividend Payout Ratio at 60% or less is prudent, as is keeping yield at 6% or less. The risks are simply too great otherwise.
I have a couple of high DPR and high yield stocks – and I would prefer not to have them as long term holdings. There simply isn’t the growth in these companies and always the threat of looming dividend cuts, or increasing debt etc.
I think other important screenig criteria need to be considered in addition to yield, DPR, and P/E. One of these of course, as you mentioned, is the dividend growth rate – as is some type of beta etc. Otherwise you’re simply ranking on yield
Cheers and well done!
Cheers Ninja!
The yield list is definitely just a sorted yield list and it really shows what My Own Advisor has said that many are previous income trusts which is also an interesting finding since their conversion. Will they keep it up? Will they reduce it? or Will they even grow the dividend in the coming years?
I am definitely with you on the dividend growth. I’ll try to find some time to add the years of dividend growth. Should be relatively easy to track for at least the past 5 or 10 years.
I have added a table with the DPR filter at 60% and I listed the Beta since I have it but I don’t do any calculation with it to impact the score yet.
In the end, it’s information to help make a decision. The filters are really easy to change
I have updated the post with a list where the DPR is adjusted for 60% in my calculations.
PIE, Cheers. You might be interested to know I am working on a detailed article about the Income Trusts and their conversions, for the September MoneySaver. Should be posted on the Dividend Ninja after Sept 15th. Have a great long weekend!
That’s great! I can’t wait to read it.
[...] Top 20 Diviend Stocks July 2011 -Passive Income Earner Value Rankings -Dynamic Dividend Top 100 Dividend Stocks -Intelligent Speculator Lists of potentially good buys become even more relevant after huge sell-offs. If these were bargains a few days ago, they’re even better bargains today. [...]
Hello,
Just came across your post, and really like most of your screening criteria, especially once you lowered your max DPR to 60%.
I am just wondering, it appears as though JE was ranked #1 on every list you made above, yet you made very little mention of it in your post. What are your thoughts on this one?
Thanks, I appreciate the opinion!
Josh
@Josh
Thanks for your comment. I had JE for a little while and sold it to buy into US conglomerates in my RRSP. I bought JE as an income trust and held during the transition to a corporation. After a while, I wasn’t sure how much growth they would get. I was reading their quarterly reports and it was obvious that they had a lot of churn in their customers. They weren’t acquiring them fast enough and I wasn’t sure about their ability to highly profit from the business expansion in the U.S.
I did not see anything wrong but I did not see any major growth. The dividend was good but a high dividends is usually a sign that there is something not quite right that keeps investors at bay.