Skip to main content
number cruncher

What are we looking for?

Canadian dividend-payers set to benefit from the federal government’s Trans Mountain intervention.

The screen

Uncertainty over the Trans Mountain expansion project has delayed billions in capital investment by Western Canadian oils sands producers. The federal government’s decision this week to buy the existing pipeline and proceed with its twinning should spur these companies to increase exploration, development and production. In the end, greater pipeline capacity will cut shipping costs for Canadian bitumen and, in turn, push up the market price for that heavy crude.

What’s more, higher sales of oil at higher prices boosts cash flow. That primes the pump for higher payouts and greater dividend sustainability.

Our search started with a list of Canadian companies with significant oil sands exposure. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency 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. 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. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated seven stocks. Imperial Oil Ltd. and Suncor Energy Inc. hold 25 per cent and 58.7 per cent, respectively, of big oil sands producer Syncrude Canada. (The other investors are Sinopec Canada and CNOOC Ltd. subsidiary Nexen.) Suncor’s other interests in the region include its 54.1-per-cent-owned Fort Hills oil sands project north of Fort McMurray, Alta. Coal-miner Teck Resources Ltd. owns 20.9 per cent of that same project, while Cenovus Energy Inc. and Canadian Natural Resources Ltd. are long-time Alberta oil sands producers. Husky Energy Inc. is also prominent in that province as well as Saskatchewan. Computer Modelling Group Ltd. offers producers on both sides of the border 3-D modelling software to squeeze more from their resources.

Oil sands players expected to benefit from greater pipeline capacity

Ranking*CompanyTickerDiv. Sustainability RatingPointsDiv. Yield (%)Market Cap. ($ Mil.)1Y Total Rtn. (%)Recent Price ($)
1Suncor Energy Inc.SU-TAbove Average92.882,870.021.551.72
2Canadian Natural ResourcesCNQ-TAbove Average83.054,779.213.345.31
3Imperial Oil Ltd.IMO-TAbove Average81.834,519.510.242.71
4Husky Energy Inc.HSE-TAbove Average81.618,213.114.718.52
5Cenovus Energy Inc.CVE-TAbove Average71.516,552.07.413.57
6Computer Modelling GroupCMG-TAverage64.2761.9-2.99.62
7Teck Resources Ltd.TECK.B-TAverage60.619,557.639.535.12

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.

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

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

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe