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What are we looking for?

Canadian dividend stocks set to rise alongside the loonie.

The screen

Rising interest rates, Canada's strong economy and U.S. political uncertainty should continue to lift the loonie. The trend will benefit importers, if few others. Today's search starts with Canadian stocks set to profit from a rising dollar – either because of their heavy foreign supply chains, or their U.S. and international travel offerings.

We then applied our TSI Dividend Sustainability Rating System, which awards points to a stock based on eight key factors:

  • One point for a long-term (at least five years) record of dividends – two points for over five years of continuous payments.
  • Two points if it has raised the payment in the past five years.
  • One point for management’s public commitment to dividends.
  • One point for operating in non-cyclical industries. Profits at businesses in cyclical industries, such as oil and mining, tend to move up and down with the economy. Sharply lower earnings could prompt a company to cut its dividend to conserve cash.
  • One point for limited exposure to foreign-currency-exchange rates and freedom from political interference.
  • Two points for a strong balance sheet, including manageable debt and adequate cash.
  • Two points for a long-term record of positive earnings and cash-flow-sufficient to cover dividend payments.
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability rating. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of the Successful Investor Inc. – Pat McKeough's widely followed group of Canadian investment newsletters. They include our award-winning flagship newsletter, The Successful Investor, which covers TSX-listed stocks. The TSI Dividend Advisor is the newest addition. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated six stocks best positioned to profit from a rising loonie – while offering investors highly dependable payouts. Retailers Reitmans and Leon's Furniture are primed to see their buying power with foreign suppliers rise. The same goes for Canadian Tire and northern retailer North West. WestJet should also see demand increase for its destinations outside Canada, while a rising dollar should reduce imported wine costs for Andrew Peller. In addition to its Canadian labels, the company acts as distributor for several foreign ones; it also imports wines for blending with Canadian-produced vino. All six of our top stocks appear in the accompanying table.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

Select Canadian dividend stocks

Ranking *CompanyTickerDividend Sustainability RatingMarket Cap. ($ Mil.)Dividend Yield (%)Points
1Canadian TireCTC.A-THighest10,320.21.810
2North West Co.NWC-TAbove Average1,483.34.29
3Andrew PellerADW.A-TAbove Average473.31.79
4WestJet AirlinesWJA-TAbove Average2,819.92.38
5Leon's FurnitureLNF-TAbove Average1,281.32.77
6Reitmans (Canada) Ltd.RET.A-TAverage282.14.46

 Source: Dividend Advisor

* Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.