Canada: A Rich History of Dividends

Jun 22, 2019 | Spencer Glenn


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No shortage of Canadian equities with a consistent dividend track record

 

Above is a list of Canadian companies with 10+ years of consecutive dividend increases.

The top three companies for consecutive dividend growth are:  

  • Canadian Utilities (47 years)
  • Fortis Inc. (45 years)
  • Toromont Industries (29 years) 

The top three companies with the highest rate of dividend increases over the last 10 years include:

  • Suncor (10 year rate of increase: 21.8%)
  • Enghouse Systems (10 year rate of increase: 21.5%)
  • Canadian Natural Resources (10 year rate of increase: 21.0%)

Conspicuously absent from the list are the top 6 banks, which paused dividend increases during the global financial crisis in 2008/2009 in the face of financial market uncertainty. This trend among financial institutions was bucked by Canadian Western Bank and Laurentian Bank which have had increasing dividends for 27 years and 11 years, respectively.

 

What’s interesting to note is quality dividend growers are not sequestered to any one sector. The consistent dividend growers include utilities, technology, energy, real estate, industrials, media, grocers, railway, plastics manufactures, banks to name a few. The list represents a healthy cross section of multiple sectors that have proven to be good stewards of capital and sustain a business model that rewards shareholders over the long-term.

 

Despite some of the success stories; however, one will observe that the dividend growth rate across all the constituents has been decreasing in recent years. The average 10-year rate is more than the average 5-year growth rate. And the average 5- year growth rate is more than the average 3-year growth rate. The 1-year dividend growth rate is the lowest, indicating the trend for dividend growth has slowed in the Canadian capital markets in recent years.

 

Examples of Dividend Recovery

It is possible for good companies to hit headwinds and revise their dividend payout. For example, TC Energy (formerly TransCanada Pipelines) cut its dividend by almost a third in 1999 and the share price dropped precipitously. However, the company has since demonstrated almost 20 years of consistent, consecutive dividend increases since then. And the share price has approximately tripled in that time frame. Likewise, Telus Corp but it’s dividend by over half in 2001 but has gone on to 15 years of consecutive dividend increases, in tandem with the share price.  

 

Why does this matter?

The main goal of investors is to preserve purchasing power against inflationary risks. To put the dividend yields and growth rates into perspective, the average inflation rate for the last 10 years is approximately 1.8%. A diversified dividend portfolio, over the long run, is one strategy to address inflationary risk. “If you’re looking for inflation-beating dividend growth, track record and consistency speaks volumes.”