This month we wanted to run a stock screen (AKA stock filter) that points out companies that continually reward shareholders.
The idea of concurrent buybacks and dividends is a pretty powerful one. As a company purchases their own shares in one year, they have actually set themselves up for further dividend increases down the road as they now have less nominal cash flows that need to be directed to the lower share count. If the company is comfortable with the same cash flow level of dividends, then there is potential for an increased dividend on a per share basis. Where the downside of this strategy comes into play is whether or not the company could be directing these funds toward more productive assets and if it means the company in question is admitting a lack of growth opportunities. This, obviously, would need to be determined on a case-by-case basis.
Looking closer at the filter, here are the metrics we used:
- Market capitalization of $100 million or more
- Trailing 12 month percent change in common shares less than or equal to 0%
- Dividend per share five year compound growth of greater than or equal to 5%
It is a simple filter but sometimes simple is best. As usual, the market cap filter helps to screen out some of the higher risk and speculative names. The 12-month change in shares helps to show companies that have a decreasing share count over the last year while the five-year dividend growth screen shows us companies with a longer-term track record of raising dividends. The filter returned 23 stocks in various industries and of various sizes. We are happy to see some companies on the list that are also held in our model portfolios such as Magna and Bank of Nova Scotia as well as some lesser known coverage companies such as Richards Packaging.
| Identifier | Company Name | T12M % Change in Shares Outstanding | Dividend/Share Common Stock Primary, 5 Yr CAGR (FY0) |
Hist Div Yield Comm Stk Primary, % (FY0) |
| GCG.TO | Guardian Capital Group Ltd | -1.8% | 10.8% | 1.3% |
| PJCa.TO | Le Groupe Jean Coutu PJC Inc | -1.1% | 16.3% | 1.6% |
| MG.TO | Magna International Inc | -7.2% | 76.0% | 1.4% |
| CTCa.TO | Canadian Tire Corporation Ltd | -3.1% | 17.4% | 1.5% |
| MRU.TO | Metro Inc | -4.4% | 41.0% | 4.1% |
| MX.TO | Methanex Corp | -4.8% | 8.9% | 2.1% |
| OCX.TO | Onex Corp | -2.3% | 14.2% | 0.3% |
| POT.TO | Potash Corporation of Saskatchewan Inc | -2.3% | 60.0% | 4.0% |
| BNS.TO | Bank of Nova Scotia | -0.4% | 5.5% | 3.7% |
| SU.TO | Suncor Energy Inc | -1.8% | 27.7% | 2.8% |
| WFT.TO | West Fraser Timber Co Ltd | -2.6% | 19.5% | 0.4% |
| ESI.TO | Ensign Energy Services Inc | -0.2% | 6.6% | 4.6% |
| TCW.TO | Trican Well Service Ltd | 0.0% | 24.6% | 5.4% |
| T.TO | TELUS Corp | -2.5% | 9.3% | 3.5% |
| CNR.TO | Canadian National Railway Co | -2.7% | 14.6% | 1.2% |
| CIX.TO | CI Financial Corp | -1.0% | 13.6% | 3.7% |
| CP.TO | Canadian Pacific Railway Ltd | -6.4% | 7.2% | 0.6% |
| RPI_u.TO | Richards Packaging Income Fund | -0.1% | 17.1% | 6.5% |
| AIM.TO | Aimia Inc | -1.2% | 7.3% | 4.9% |
| EFH.TO | EGI Financial Holdings Inc | -0.3% | 41.7% | 3.0% |
| BDI.TO | Black Diamond Group Ltd | -2.9% | 11.4% | 7.3% |
| MIC.TO | Genworth MI Canada Inc | -2.9% | 12.1% | 1.1% |
| LTS.TO | Lightstream Resources Ltd | -1.3% | 8.4% | 30.3% |
We often get notes after posting these screens asking why we ‘chose’ the certain stocks and just wanted to remind readers that stock filters are only meant to be idea generators. They are used to find a list of companies that exhibit a metric, theme or trend of interest. From that list, the investor is then able to dive deeper into a company to see if everything ‘checks out’. So please do not misconstrue any of these companies as an endorsement.
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