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