With markets moving sideways in the last while and investors concerned over how the economic backdrop will impact earnings, we wanted to see which companies can and have taken shareholder value into their own hands by giving back to the shareholders through both share repurchases and dividend increases. The argument as to whether share repurchases or dividends are better for investors is ongoing and a topic for another time, but needless to say, a bit of both is not going to hurt shareholders (as long as the company can afford it). We have kept this filter simple with the following requirements: 

• Trades in Canada
• Outstanding shares have decreased by 5% or more over the last 12 months
• Dividend growth of greater than or equal to 5% over five years

The decline in share count means that existing shareholders will have a greater share of the earnings than they did a year ago while also receiving a greater amount of cash in their bank account over the long term from the dividend. Interestingly, decreasing the share count with excess cash makes it easier to raise dividends through sustainable cash flows as less shares means less total dividends being paid (i.e. $1 per share on ten shares one day, then $1 per share on five shares tomorrow while sustainable cash flows remain steady), allowing for higher dividends inthe future. The torque that can occur here can be impressive!

The list is a short one with ten names making the cut. Interestingly, four of the names are companies we either cover or hold in our model portfolios (or both). Of the names that grab our attention, we think TFI is interesting due to the momentum the company is seeing in the share price while holding an arguably cheap valuation (albeit cyclical). Add in some fairly aggressive share buyback levels and it is a name worth noting. The clear winner on this list, in our view, would be Sylogist (Ticker: SYZ). SYZ is a name we have held in our model portfolio for some time now, has announced they feel their shares have been undervalued for a few quarters and has backed up their statements by repurchasing a good deal of shares while materially increasing dividends. Regardless, all names on this list have been rewarding shareholders over the long-term and we tend to find that the companies that have done it in the past continue to do it in the future when appropriate and everyone seems to win over the long-term.

We looked at a similar filter roughly a year ago that can be found here.

As usual, please note this is simply a stock filter and not a recommendation on the investment merits of stocks mentioned. Sign up to the blog below to get future 5i Filters.