11 Canadian Dividend All-Stars with 10%+ Dividend Growth

One of my greatest challenges as a dividend growth investor is selecting companies that have a sustainable competitive advantage that allows them to grow their revenues and earnings in order to consistently deliver dividend growth.  As my largest holding, Alaris Royalty, has proven this year, an impressive history of dividend growth does not eliminate the probability of going through difficult times that impair a company’s ability to grow their payout.  

With that in mind, I thought it would be beneficial to look at the Canadian dividend all-stars with at least a 5 year history of increasing their payouts, to see which companies increased their dividend by double digits over the past 12-months.  Given my investment philosophy of focusing on companies with at least a 3% dividend yield, I narrowed down the results by adding that minimum yield filter. For those wondering why 3%, I feel that it compensates for inflation while removing companies whose management might not consider it important to return a meaningful percentage of their profits to shareholders.  The resulting screen yielded 11 companies, including two that I eliminated as potential holdings due to factors outlined below.

One company I quickly excluded was Pason Systems Inc. which provides data management systems to oil drilling rigs. A look at their last seven quarters of financials clearly demonstrates the company is having a difficult time adapting to the falling price of oil and decreased drilling activity in Canada. Given the negative payout percentage and TTM P/E multiple, this company could easily be cast aside as too difficult to further analyze. Likewise, with a a 228% payout ratio and 55X P/E multiple, Nevsun, a mining and exploration company, does not strike me as a candidate for further research.

Gluskin Sheff, a provider of wealth management services to high income individuals and institutions is an intriguing organization. Not only has their regular quarterly dividend grew steadily, they also pay a special dividend once a year. That said, I am a long-term pessimist for active wealth management firms given the structural shift toward passive investing.

My investment holdings include Enbridge Income Fund, Enercare (a recent purchase), Emera, and Enbridge Inc. I have owned Canadian Utilities in the past, but find the current P/E a tad high, especially when also taking their 87% payout ratio into consideration. Algonquin Power & Utilities has long peaked my interest, and with their share price about a dollar cheaper than it was on October 31st, it is definitely on my "future considerations" list. 

Sadly for me, Evertz Technologies and Agrium both operate in industries outside of my circle of competence. Of the two, I find Evertz more appealing given the lower P/E, longer dividend growth streak, and less reliance on commodity prices outside of the firm's control. That said, there is definitely a customer risk given Evertz sells into the Canadian television broadcast and media industries, which are constantly in search of ways to cut costs in order to remain competitive.

Which of the 11 companies above interests you the most for potential investment?