Digging for Dividends

Someone asked me how you can find high paying dividend stocks.  This post is a guide to looking into Canadian dividend stocks with a yield of 8% or higher and seeing if any of them are potential good investments.  First off a good starting point is the TSX stock screener that let’s you find stocks that match certain criteria.  I searched all Canadian stocks that have dividend yields between 5% and 50%.  Then I sorted the list by dividend yield and wrote down each stock with a yield of 8% or more.  Here is the result:

MCM.A, MCS, CBL, TZS, WED, DGS, CJR.B, MKZ.UN, FTN, LCS, FFN, BSO.UN, HFC.PR.A, MMP.UN, LND, ELC, LBS, DC.PR.B, F.UN, DFN, CCI.UN, PDV, INC.UN, DS, DC.PR.D, BK, GXO, EIT.UN, KWH.UN, BGI.UN, HOT.UN, PRM, CCZ.PR.A, SOT.UN, PEGI, TMC, XTD, AD, ERE.UN, FGX, PRV.UN, CJ, BTB.UN, TNT.UN, MTG, SKG.UN, AFCC, DE, ALA, EFN.PR.E, SRT.UN, JE, FAP, CWX, SBC, EFN.PR.A, SIN.UN, PAR.UN, BIR.PR.A, IVQ.U, TXT.UN, EFN.PR.C, MKP, EFN.PR.G, AZP.PR.A, BNE, DR, MR.UN, ESI, HGI.UN, EFN.PR.I, ENF, SAT, NXR.UN, BBD.PR.D, RNW, SNI.PR.A, INO.UN, BBD.PR.C, PTG.

It’s a long list of 80 stocks.  I quickly went through them and removed all of then that were either funds, split share corporations, in the process of winding up or no longer existing.  This resulted in:

MCM.A, MCS, CBL, WED, CJR.B, HFC.PR.A, LND, ELC, DC.PR.B, DC.PR.D, GXO, KWH.UN, HOT.UN, CCZ.PR.A, SOT.UN, PEGI, AD, ERE.UN, PRV.UN, CJ, BTB.UN, TNT.UN, AFCC, DE, ALA, EFN.PR.E, SRT.UN, JE, CWX, EFN.PR.A, PAR.UN, BIR.PR.A, IVQ.U, EFN.PR.C, MKP, EFN.PR.G, AZP.PR.A, BNE, DR, MR.UN, ESI, EFN.PR.I, ENF, SAT, NXR.UN, BBD.PR.D, RNW, SNI.PR.A, INO.UN, BBD.PR.C, PTG

This is a slightly less long list of 51 stocks.  I am further going to remove MCM.A, MCS, ELC, GXO, CJ and BNE as they are in mining and oil which though they may be a good investments are not stable enough to be dependable dividend payers.  I will remove CBL as it may be going private.  I will further remove HFC.PR.A, CCZ.PR.A and ERE.UN as they are either too new, small or risky.  I will also remove PRV.UN as seems to pay out more than it earns.  This gives 40 stocks to choose from:

WED, CJR.B, LND, DC.PR.B, DC.PR.D, KWH.UN, HOT.UN, SOT.UN, PEGI, AD,BTB.UN, TNT.UN, AFCC, DE, ALA, EFN.PR.E, SRT.UN, JE, CWX, EFN.PR.A, PAR.UN, BIR.PR.A, IVQ.U, EFN.PR.C, MKP, EFN.PR.G, AZP.PR.A, DR, MR.UN, ESI, EFN.PR.I, ENF, SAT, NXR.UN, BBD.PR.D, RNW, SNI.PR.A, INO.UN, BBD.PR.C, PTG

If you wish you can then further investigate these to determine if any look promising.  I will just highlight a few I find interesting.  Firstly I currently own DC.PR.B and TNT.UN.  I think these are good choices that can afford their high yields.  I also like Alaris Royalty (TSE:AD) as a potential investment.  It’s a business royalty company that gives money to medium sized private companies in exchange for a sales royalty.  I remember this used to be a darling company that every fund manager used to talk about.  Looking at the stock chart we can see it used to trade above $36 at one point when everyone was talking about it, but now it trades for around $16.50.  Looking at the yearly results from 2017 it seems to earn more in cash flow than it pays in dividends so the yield should be sustainable.  I have found one possible reason for the current dip in the share price.  SCITI trust (TSE:SIN.UN) is closing down and Alaris happens to be it’s largest holding.  The closing of the trust will cause it to sell all of it’s shares which will cause a temporary headwind for the stock but then it should recover after it’s complete.  In my opinion this makes Alaris a good buy on both a short term and long term basis.

Disclosure: I own DC.PR.B and TNT.UN and may purchase AD in the near future

7 thoughts on “Digging for Dividends

  1. DC.PR.B – I did some research on this one. I understood how preferred shares rate reset work – I dont understand why the SP is not going up in a rate hike environment. It tells me 2 things a) default risk is high b) markets dont believe that Poloz is going to hike a lot or in short is a muted hike cycle. what am I missing here?

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    1. Dundee Corporation is very interesting as it is either one of the biggest value plays on the TSX or it’s a value trap that’s going to zero. You are right with option ‘A’ the market is pricing the company as if it’s going bankrupt. Interest rates are irrelevant in the pricing of the Dundee preferred shares. However I think the market is way over-estimating the likelihood of Dundee going to zero. The management of Dundee has been making a lot of bad decisions lately though which is why I prefer the preferred shares to the common at the moment though both offer a lot of value. I would keep any investment in them limited in size though. I may do a blog post on Dundee at some point in the future.

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  2. Thanks for the quick response! I downloaded their annual report and flipped through the pages- didn’t get a chance to dive deep- will do in summer. 2 things caught my attention – their org structure is pretty weird and one of their subsidiary filed for bankruptcy. I have a gut feeling that due to that it is being priced for bankruptcy. Looking forward to your blog on Dundee!

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