What are we looking for?
Securities providing a strong, sustainable dividend that can be used to supplement the return of long-term bonds within a portfolio.
The screen
Strong domestic economic data have been a common theme throughout 2017 and, with hints of above-target inflation coming into play, it appears that yields that were once sought after in the long-term bond market are coming to an end. With that being said, investors looking to supplement this yield in their portfolios are turning to equity securities that offer bond-like characteristics through long-term dividend stability. Today's screen seeks out high yield equity securities by looking at Canadian companies with a dividend yield of at least 5 per cent.
To measure the sustainability of these dividend payments, the screen includes a filter for a dividend payout ratio of less than 80 per cent – ensuring a healthy level of income available to shareholders is being invested back in the business. Companies must also have a Combined Credit Rank – a StarMine proprietary measure – of at least 50, with a larger number indicating lower credit risk.
More about Thomson Reuters
Thomson Reuters delivers trusted news and intelligent information to more than one billion people in 140 countries every day. Our content, software and technology support the way professionals work in a rapidly changing, ever more complex world. Thomson Reuters Eikon is the platform used by financial and corporate clients to access top research, portfolio analytics, charting and screening for every asset class.
What did we find?
Eighteen companies were returned in the screen results, with many real estate investment trusts, not surprisingly, included within the list.
Topping out the screen results with the largest dividend yield was Dividend 15 Split Corp., a Canadian mutual fund company investing in a portfolio of dividend yielding common shares that is managed by Quadravest Capital Management.
Sirius XM Canada Holdings Inc. also made the screen results, and in addition to its impressive dividend yield of 7.4 per cent, the stock's price return over the past year is almost 20 per cent.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Ryan Gottschalk works in the financial and risk unit of Thomson Reuters and specializes in asset management.