McCormick

Spice up your Dividend Portfolio with McCormick

McCormick (NYSE: MKC) is the latest food-related stock to raise its dividend. McCormick announced an 8.3% increase to its quarterly payout. The company will now pay $0.26 per quarter, up from $0.24. This is the 24th consecutive year that McCormick has boosted its payout. The company has been paying a dividend since 1925.

ATCO or Canadian Utilities

The utility sector is a great area to find conservative income investments. Both ATCO and Canadian Utilities have been great dividend growth stocks. Which one should you buy; the pure play or the holding company?

ATCO is a holding company whose principal asset is a 52% stake in Canadian Utilities. By purchasing ATCO, you get additional diversification. Other divisions include ATCO Structures, ATCO Electric (transmission lines) and ATCO Resources (power generation). Canadian Utilities is expected to deliver 80% of ATCO's earnings in 2010.

Canadian Utilities is involved in regulated gas and electric utilities, gas pipelines, unregulated electric generation, gas midstream and logistics businesses. The Utilities group provides natural gas and electricity transmission and distribution to customers in Alberta and the Northern Canada.
 

 
The future looks bright for both stocks given that significant energy infrastructure is needed between 2010 and 2017 to meet current and future electricity demands in Alberta.
 

 
Given that ATCO's dividend growth rate has slowed down significant over the past few years, Canadian Utilites would be my choice of the two. By going with Canadian Utilities, you get a higher going-in yield (3.5% vs. 2.2%) and a similar dividend growth rate going forward. Also, Canadian Utilities stock performance has lagged ATCO year-to-date.

Canadian Natural Resources

Canadian Natural Resources (CNQ) has been one of the better dividend growers from the oil patch. CNQ started paying a dividend in 2001 and has raised its dividend every year since. The company typically raises their dividend in Q1. Dividend Investors can expect an increase for the April 2010 payment. CNQ is a premier energy company and dividend grower; the only drawback is at the current price, the shares yield a paltry 0.6%.

Chart updated on March 4, 2010

Under the Radar: Talisman

Talisman quietly keeps raising its dividend

A colleague of mine (CP) noticed that I missed one. I get most of my dividend data from FP Data Group and Talisman wasn't on the list. After checking the dividend history on the company's website, I was surprised to see that Talisman has increased their dividend 241% since 2002. Talisman, which pays a semi-annual dividend, normally increases its dividend every June. In fact, Talisman has raised its dividend 7 times in the last 7 years.

EnCana Dividend Update

With the break-up scheduled to occur on November 30, many investors have been asking what will happen to the dividend. Management has given guidance that on December 31, both EnCana (Gas) and Cenovus (Oil) will each pay a dividend of $0.20. Therefore, if you hold both pieces of the company after the split your cash flow will be unaffected. The management teams of both companies have stated that dividend growth and an attractive current yield are priorities going forward. As for the 2010 Q1 dividend, that will be up to the Board of Directors of the new companies to decide.

 

Since its formation in 2002, EnCana has increased their dividend four times:

• 50% increase in June 2005
• 33% increase in June 2006
• 100% increase in March 2007
• 100% increase in March 2008

FYI – EnCana pays their dividend in US dollars.

U.S. Dividend Growth

Looking Stateside for Dividend Growth

Canadian investors might find it worthwhile to look at U.S. stocks for Dividend Growth, especially if these stocks can fill a gap in your portfolio. Many Canadian investors have insufficient exposure to Consumer Staples and Health Care stocks.

Below is a sample of some U.S. stocks that have strong track records of consecutive yearly dividend increases that may complement your existing Canadian Dividend Growth Stocks:

• Procter & Gamble (PG) – 53 years of dividend growth
• 3M (MMM) – 51 years of dividend growth
• Johnson & Johnson (JNJ) – 47 years of dividend growth
• Coca Cola (KO) – 47 years of dividend growth
• Sysco (SYY) – 40 years of dividend growth
• Pepsi Co (PEP) – 37 years of dividend growth
• Becton Dickinson (BDX) – 37 years of dividend growth
• Abbott Laboratories (ABT) - 36 years of dividend growth
• Wal-Mart (WMT) – 33 years of dividend growth
• McDonald’ s (MCD) – 32 years of dividend growth
• McCormick  (MKC) – 24 years of dividend growth

The Strategy

This quote by Tom Connolly summarizes why I am a Dividend Growth Investor:

"Dividend Growth Investors do not have to depend upon prices of stocks to finance retirement. It is the income these stocks provide we are after. Our income from Canadian tax-advantaged dividends went up last year. It will go up again next year. That's our objective ... growing retirement income."

...

Manulife Needs More Capital

Manulife sells $2.5-billion of stock at $19 per share

The company continues to build its "fortress levels of capital". Manulife issued that same statement when they cut their dividend by 50% in August. It appears that Manulife's troubles aren't over.

Dividend Investors take note and move on...

Sysco Not Cisco

Sysco, the food distributor not the tech company, raised its quarterly dividend by 4% from $0.24 to $0.25. Sysco has increased its dividend every year for the past 40 years since becoming a public company.

Cisco, the tech company, does not pay a dividend.


Canadian Investors looking for a similar company should look at Colabor (GCL) with a current yield of 8%.

Defense with Dividends

In a recent interview, Bill Tynkaluk, President of Leon Frazer, recommends investors get more defensive by focusing on stocks that pay good dividends that are likely to increase over time. Tynkaluk currently has his eye on Enbridge, TransCanada, Fortis, Emera, BCE, Rogers and Shoppers Drug Mart.

“We hope to make a little money on utilities such as Fortis, which has raised its dividend, and BCE, which is yielding 6%”. Tynkaluk also has his eye on railways “but not at these prices”.

“I don't think you should be taking too much risk in this market. I think most of the stocks are overvalued. They're considerably ahead of earnings. If the earnings are not there, market prices will fall. We're being very, very cautious.”

A defensive strategy works best when stock markets have run ahead of earnings. Buying inexpensive shares with good growth prospects and rising dividends is also a good long-term strategy.

Tynkaluk’s market outlook is dismal. “Multiples are huge. How much higher can earnings go? I think it's going to take three or four years before earnings catch up to these multiples. We're very cautious.”

CI Financial's Mixed Results

CI Financial reported Q3 results:

• Good News: CI raises dividend 20%
• Bad News: Profit plunges 86%

The new dividend rate is $0.06 per month.

CREIT: 13 out of 14

Canadian REIT (CREIT) raised its annual distribution by 1.5% to $1.38.

“CREIT has increased distributions in 13 of the last 14 years, something we believe is not reflected in the trading price of its units. We believe it will continue with an annual increase each year for the next few years, in stark contrast to many REITs which are expected to hold distributions flat.”

Mike Smith, Macquarie Securities

Smith has a price target of $28.50 on CREIT.

Shoppers Reports

• The Street was looking for EPS of $0.80
• I was looking for a Dividend Increase (It has been way too long)

Good Results, But No Dividend Increase.

Dividend Growth from Banks

Banks have been rewarding income investors for years. In good times, it is common to get two increases per year from the Canadian Banks. The growth rates vary among the Big 6 Banks with RBC being the best and CIBC being the worst over the past 5 years. The last time there was a dividend cut among this group was when National Bank cut their payout in 1992.

Outside of the Big 6 Banks, Canadian Western Bank has been a prolific dividend grower while Laurentian Bank has been a dog.

Dividend Growth from Utilities

Most Utilities raise their dividends annually, but the growth rates vary dramatically. Most investors hold both Enbridge and TransCanada in their portfolios. Both have increased their payouts 5 times in the last 5 years. Enbridge which has historically traded with a lower current yield than TransCanada has rewarded investors with better dividend growth over the period.

The best dividend grower in the sector has been Fortis with a growth rate of 14% per year.

Dividend Growth from Food

If you are looking for a food retailer to add to your portfolio, Metro and Empire are better bets for Dividend Growth than Loblaw. Both have increased their payouts 5 times in the last 5 years.

Another option in the Consumer Staples sector is Saputo (SAP). Saputo has also increased its dividend 5 times in the last 5 years. Its dividend growth rate at 14% is higher than the grocers too.

All of these stocks have low payout ratios as well.

Telus Disappoints Income Investors

Telus disappoints Income Investors by not raising its quarterly dividend payment. This ends a streak of the company raising its payout every four quarters. Many investors were expecting an increase from Telus this quarter.

Going back in history, Telus cut their quarterly dividend in 2001 from $0.35 to $0.15. Telus has not been a good Dividend Growth stock for long-term shareholders. Had you invested prior to the cut, you would have had to wait 5 years for your dividend income to return to its 2001 level.

Best Dividend Growth Stocks

Best Canadian Dividend Growth Stocks

(ranked by the number of increases over the past 5 years)

If you are looking for Dividend Growth you can find it from the banks, the utilities, the railways, the food retailers, the telecos and even in the energy sector. Use this list as a starting point for your research.

Buy Fortis For Dividend Growth

The Globe & Mail published a great article on Tom Connolly and his best Dividend Growth Stock: Fortis

Fortis is a gas and electric utility that operates in several provinces across Canada. Connolly first purchased the stock in 1995 and since then, he has been watching his dividend income grow. Connolly's main metric for evaluating stocks is by comparing the current dividend yield versus the historic average yield. He buys when the yield is above average.

Connolly's adjusted cost base is $6.16 and the dividend currently generates a yield of 16.9% based on his cost. As well as the stock being a cash cow for his portfolio, Connolly has a massive capital gain since Fortis trades above $25 today.

Connolly is an advocate for dividend growth investing and is the author of the Connolly Report. More information can be found at his website: http://www.dividendgrowth.ca/

There's not too many companies to worry about. There might be 20 good dividend growth stocks in Canada – a small group of Canadian stocks that have really good dividend growth, good cash flow and products that you need. It's just a matter of picking a utility, or a bank, or a food retailer, or CN Rail, or a couple of industrials and build a portfolio that way.

Visa Increases Dividend

Visa increased its quarterly dividend by 19% to $0.125. The company paid a dividend of $0.105 for the past 5 quarters. This marks the first dividend increase since the company's IPO in 2008.

Enbridge Income Fund

Enbridge Income Fund (ENF.UN) announced that it is evaluating plans to convert from a trust to a corporation.

Enbridge Inc. (ENB owns 72% of the units) said it is not considering acquiring the public's interest in the Fund.

Buffett Buys Burlington Northern

Berkshire Hathaway has agreed to acquire railroad Burlington Northern Santa Fe (BNI) for US$34 billion ($100 per share). Berkshire previously owned 22% of BNI prior to the deal. Buffett is essentially making a huge bet on the future of the U.S. economy.

The deal “is a very high-profile catalyst that we think will spark some added interest in the group,” said RBC Dominion Securities analyst Walter Spracklin. “It's a big bet on a solid industry.”

CML HealthCare Update

Brad Ferris updates CML Healthcare on his Blog.

http://www.nurseb911.com/2009/11/mail-bag-cml-healthcare-clcun.html

RioCan Update

RioCan has been in the spotlight since announcing that it will be making U.S. acquisitions and buying a minority stake in Cedar Shopping Centers. Here's a quick update:

• Current Annual Distribution = $1.38
• Fund From Operations = $1.25 (Funding Gap)
• CEO Ed Sonshine vows not to cut the distribution
• RioCan has the balance sheet strength to continue paying its distribution for several years
• Rated "Hold" from 10 analysts, "Buy" from 3 analysts

I currently rate RioCan a "Hold" since the units are trading at a premium (NAV = $16) and because I am leery of a future distribution cut.