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Top 20 Dividend Stocks – January 2012 Edition

Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 maxWith a new year comes new investing opportunities. I have found that doing my Top 20 Dividend Stocks every 2 months work well as there are enough changes in the markets that it can highlight opportunities. It’s very important to understand that it is simply a screening method to look further into the companies.

One thing I have noticed since doing my Top 20 Dividend Stocks is that U.S. conglomerates do not make it on the list very often. It’s not because they aren’t good, it’s mostly because the yield tend to be lower than many Canadian corporations. I have also adjusted my formula to give a multiplier to larger corporation. I like to focus on corporations that own the market they are in and that usually translate into a larger market capitalization.

If you want to get access to some quick stock research on a technical front, try one of the services below:

Top 20 Dividend Stocks – Technical Screening

The technical screening is based on 5 criteria that I can easily fetch from Google Finance. Dividend growth is still missing as I have not had the time to track it down and add it. Nevertheless, I wanted to share the list.

  • P/E : Target is 15
  • 52 Week Range : The lower in the range the higher the score
  • Yield : Normalized up to 6% (this one is manual)
  • Payout Ratio : Under 60%
  • Market Cap : Bonus multiplier with a target of $25B or more (+/- 10%)

I did a comparison between my previous filtering and my new filtering with the market capitalization multiplier and I like it. Basically, every corporations are normalized between 0 and 1 with a 1 for any companies above $25B. Than I normalize it between 0.9 and 1.1 and use that to multiply my previous total of the first 4 criteria.

I made a couple of changes to my formulas:

  • Yield value is now normalized up to 6%. I used to disregard anything below 3% and above 8% but too many companies that perform well can also have a yield in the 2%. Instead I decided to normalize it and reduce the cap to what makes sense as in anything above 6% is either an anomaly, or there is trouble looming.
  • I fixed a payout ratio calculation problem as well where payout below 25% were disregarded. I was ranging the payout since I did not want to give too much wait to the low payout ratio since they also tend to have a low yield. I think the combination of the normalized yield will mitigate that.
The top of the list is a life insurance company and it showed up once I updated my formula. I mentioned back in November that I was a little bullish on the life insurance this year.
TickerCompanyQuote52 Week RatioP/EMarket CapDividendYieldPayout RatioValue Metric
IAG.TOIndustrial Alliance$26.6511.00%9.112.40$0.253.68%33.56%5.42
WAG** Walgreen$34.2323.20%11.6229.90$0.182.04%23.73%5.28
MFC.TOManulife$11.8718.55%11.0221.29$0.134.38%48.15%5.20
LB.TOLaurentian Bank$45.5540.17%9.481.09$0.453.95%37.42%5.18
COS.TOCanadian Oil Sand$24.8242.17%9.8412.03$0.304.83%47.62%5.13
TCL.A* Transcontinental Inc$12.7138.35%10.411.03$0.144.41%45.90%5.08
CM.TOCIBC$75.0142.16%10.2630.06$0.904.80%49.25%5.04
SJR.B* Shaw Communications$19.6717.01%12.188.64$0.084.68%56.79%4.96
BNS.TO* Scotia Bank$52.3134.72%11.3356.97$0.523.98%45.02%4.96
HSE.TOHusky$24.1835.68%11.3823.15$0.304.96%56.60%4.91
BBD.BBombardier$4.4827.39%8.537.72$0.032.23%18.87%4.90
POW.TOPower Corporation$24.2338.72%11.69.96$0.294.79%55.50%4.80
CPBCampbell Soup$31.4429.31%13.0610.02$0.283.56%46.47%4.74
LLYLilly$39.266.98%9.3645.38$0.495.00%46.78%4.69
HASHasbro Inc.$35.0621.69%12.064.52$0.252.85%34.36%4.69
L.TOLoblaws$36.4525.00%13.9210.27$0.212.30%32.06%4.65
BMO.TOBank of Montreal$59.2250.63%11.2637.85$0.704.73%53.23%4.63
CWB.TO* Canadian Western Bank$26.4631.74%12.462.00$0.142.12%26.42%4.60
TD.TO* TD Bank$77.1548.26%12.0369.52$0.683.53%42.43%4.58
RY.TORoyal Bank$52.3349.53%11.7775.35$0.544.13%48.54%4.55
The double star (**) highlights a US Dividend Aristocrat and the single star (*) indicates a Canadian Dividend Aristocrat.

Top 20 Dividend Stocks – Dividend Yield

This list is purely sorted by the yield. See anything you like? Income trusts are definitely surfacing and many of the other companies were also income trusts before the Canadian rule change on income trusts.

TickerCompanyQuote52 Week RatioP/EMarket CapDividendYieldPayout RatioValue Metric
JE.TOJust Energy$11.7436.57%7.221.63$0.1010.56%76.07%2.77
WRK.UNWhite Rock Real Estate$16.0498.21%10.940.55$0.1410.49%114.49%1.41
ERF.TOEnerplus Corp$23.636.63%9.054.27$0.189.14%82.76%3.00
KEG.UNThe Keg Royalty Income Fund$13.2080.08%12.110.15$0.087.27%88.07%1.64
SLF.TOSun Life Financial$20.1213.36%16.4111.73$0.367.16%117.07%2.41
AX.UNArtis REIT$15.1495.50%4.861.27$0.097.13%34.73%3.09
DH.TODavis + Henderson$17.8342.78%11.381.06$0.316.95%78.98%2.24
AGF.B* AGF Management$15.6927.02%13.321.50$0.276.88%91.53%2.59
BA.TOBell Alliant$27.8265.58%#N/A6.34$0.486.83%-52.63%#N/A
PBH.TOPremium Brands Holding Corp$17.0080.43%22.730.34$0.296.82%154.67%1.05
LIQ.TOLiquor Store Income Fund$15.8595.68%12.830.36$0.096.81%87.10%1.26
CUF.UNCominar$21.6555.00%12.581.39$0.126.65%83.72%2.09
RSI.TORogers Sugar$5.4983.74%13.510.49$0.096.19%82.93%1.44
CPG.TOCrescent Point Energy$45.4876.11%51.1613.00$0.236.07%310.11%0.77
TAT&T$29.1641.35%44.12172.83$0.435.90%260.61%2.99
PPL.TOPembina Pipeline$26.5055.76%25.724.45$0.135.89%151.46%2.94
TA.TOTransAlta$20.0515.11%11.544.48$0.285.67%65.34%4.22
GWO.TOGreat West Life$21.9632.30%11.1620.85$0.315.65%62.94%4.11
ENF.TO* Enbridge Income Fund$21.5393.09%23.130.86$0.105.57%129.03%2.18
IPL.UNInter Pipeline$17.3270.00%17.214.54$0.085.54%95.05%2.86

Thoughts

I am quite pleased with my changes. When I initially started with my technical screening, I had a focus on higher yields but at the end of the day, if you can get stock appreciation plus good yield plus dividend growth, you are golden.

For a list of my holdings, see the Dividend Income section where I list my dividend holdings monthly with the dividends earned.

Readers: Any of the companies on your watch list?

Disclaimer: 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.

Image: jannoon028 / FreeDigitalPhotos.net

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8 Responses to "Top 20 Dividend Stocks – January 2012 Edition"

  1. gibor says:

    I;m surprised not see many US dividend champions/contenders in your first table :)
    You set P/E limit as 15, but many of those div champions have P/E just slightly above 16-17, but on other hand they increased dividends for tens of years (as an example PG, JNJ, PEP etc). Personally, I’d rather to buy company that increased dividends for 50 years and have a little slightly high P/E than 15

    • The Passive Income Earner says:

      @Gibor

      Thanks for your comment. You are correct that they don’t show up and it’s mostly due to their relatively low yields and higher trading price. The list tend to highlight entry points on weaknesses rather than the long term prospect of an investment. I’d love to do a screening for long term but it’s a very manual data entry :) I would add the number of years of consecutive growth, plus the growth average over the past 10 years for my 10/10 rule and also add the debt-to-equity ratio. Those are not too time consuming when researching one company but to keep a whole list up-to-date requires a fair amount of time. That’s where investment fees go with firms :)

      I basically look at it as an indicator of weakness and decide to look at the companies that fit my portfolio direction.

  2. Porter says:

    Consistent winners may extend their gains in the months ahead because they’ve already thrived despite slowing U.S. economic growth over the past five months, Europe’s year-and-a-half debt crisis and weaker demand in some emerging economies in the current quarter. McDonald’s, for example, said today that November sales at stores open at least 13 months jumped 7.4% across the world, propelled by Asia. Analysts had forecast a rise of 5%. If global growth concerns drag on, widely expected by economists, analysts and investors, the credo of “buy low, sell high” may soon become “buy high, sell higher” — but only with companies that have proven their mettle. The S&P 500 Index’s wild ride this year — it dropped 19% from May through September but is little changed since the start of January — has driven many investors to low-yielding Treasuries and cash. That’s clearly a mistake as select stocks are rising as profit margins near a peak.
    Porter recently posted credit card debt help

  3. ronaldco says:

    How do you come up with your dividend payout ratio? AT&T has a yearly dividend of 1.76 and projected earnings for 2012 is 2.33 for a ratio of 75%.

    • The Passive Income Earner says:

      @Ronaldco
      I have it automated based on Google Finance EPS data. The DPR (Dividend Payout Ratio) is the dividends divided by the EPS. It’s currently at 80% depending on where you get the EPS from.

  4. Marsha says:

    Defensive investors like high dividend yielding stocks and consider them as viable options especially in inflationary environments. We are concerned about the Fed’s inflationary monetary policy and therefore we recommend the investors to play defensively by purchasing high quality dividend stocks.

  5. TREVOR says:

    Has a new investor, looking to create an income from my dividends shares, how much i need to put towards each share i have to have a passive income?

    • The Passive Income Earner says:

      @Trevor
      It’s a slow process. You just need to start slow and add to your investments over the years and diversify. The dividends will follow and if you pick Aristocrats, you tend to get a dividend increase every year which helps keep up with inflation.

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