Skip to main content

The Globe and Mail

Pleasing payouts with the best yet to come

Feng Yu/Getty Images/iStockphoto

What are we looking for?

Dividend stocks with the capacity to maintain – and even grow – their payouts.

While lush yields are attractive at first glance, they can be trouble if they strain a company's ability to pay. The best dividend investments tend to be companies with growing earnings and strong streams of cash flow that can easily support their current payouts.

Story continues below advertisement

How we did it

Craig McGee, senior consultant at Morningstar Canada, screened Canadian stocks based on the following criteria:

  • Market capitalizations of more than $500-million;
  • Expected yields of more than 3 per cent;
  • Payout ratios of less than 75 per cent (the payout ratio is a company’s expected dividends as a fraction of its expected cash flow);
  • Positive expected year-over-year growth in earnings per share (EPS);
  • Positive growth rates over the past five-years in EPS, cash flow and sales.

The 15 top stocks on these criteria are ranked in the table using a combination of the three five-year growth rates.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.

What we found

The 15 stocks in the table feature yields as high as 7 per cent. Remember, though, that an investor is ultimately rewarded through a combination of dividends and growth, so don't choose any stock based purely on its yield.

Story continues below advertisement

As always, it's important to do your own research by reading annual reports and analysts' coverage. While a screen such as this can turn up interesting possibilities, it's important to satisfy yourself that there are not issues that lurk behind the numbers.

Report an error Licensing Options
About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.