A stable dividend income stream, despite any macro environment, is the dream of most investors. At the end of the day, it is not earnings or cash flow, etc., that the investment community discusses, but dividends, which is considered the “real money” that investors can spend. Most companies have a quarterly dividend policy, which is the most common frequency for a lot of public companies. However, waiting three months for a “dividend paycheque” does not sound interesting to investors who are looking for income. Understanding those needs, a few Canadian companies have adopted a monthly dividend policy to attract this loyal shareholder base.

The business environment is anything but stable, there are very few businesses that are resilient and consistent enough to maintain a monthly dividend policy. These companies tend to have a recurring, subscription-like business model, which investors highly value. Companies with consistent and growing dividends year after year despite any macro environment do signal to investors that they may possess some sustainable competitive advantages that are difficult for competitors to replicate. This consistency demonstrates the staying power of the business model.

Companies that pay monthly dividends are well aware of the fact that their shareholders value income and stability more than capital gains. As a result, maintaining a track record of paying and growing dividend payments over a multi-year period is critical. A high yield along with a monthly cheque is the hallmark for this shareholder base, which especially becomes more valuable amid a declining interest rate environment. We have filtered out a small subset of companies that pay monthly dividends along with healthy growth in fundamentals.

Below we have screened for companies with the following criteria:

• Pay monthly dividends
• 10-year compounded annual growth rate (CAGR) in dividend per share of at least 3%
• Market cap larger than $50 million
• Positive Earnings before interest and tax (EBIT) CAGR in the last ten years

The criteria above reflect companies that paid monthly dividends. In addition, these companies grew their dividend per share by at least a 3% compounded annual growth rate (CAGR) in the last 10 years, which is in line with historical inflation during that period. Secondly, we like to see the dividend growth largely supported by a growth in the fundamentals. Therefore, we have screened for companies with positive EBIT growth in the last 10 years. The criterion itself is not hard to achieve, however, maintaining a positive EBIT growth while paying most of the earnings as dividends is still a respectable record.

The screener results in 14 names within the Canadian equities universe. It is understandable that the majority of them operate in the real estate industry, mainly because the economics of the industry involves monthly rents. Additionally, it is important to note that although consistent dividend payment is a good sign, investors need to ensure the growth in dividend payment going forward is supported by growing the business. In addition, real estate investment trusts (REITs) tend to have a high level of leverage which investors need to monitor and get comfortable with.

Members will recognize some of the names that we cover in our Model Portfolios and coverage lists such as Savaria Corporation (SIS), A&W Revenue Royalties Income Fund (AW.UN) and Richards Packaging Income Fund (RPI.UN).

Lastly, these companies on the list are not recommendations, but rather a starting point that helps investors generate potential investment ideas.

Unlock the Power of Informed Investing with 5i Research!

DIY investing doesn't have to mean going it alone. At 5i Research, we're your trusted partner in navigating the stock market. Our platform offers comprehensive stock and market research, empowering you to make smart investment decisions. 

• Investor Q&A: Have burning questions? Get answers from our team of experts and fellow investors in our dedicated Q&A section.
• Research Reports: With over 60 meticulously researched Canadian stocks, our reports offer in-depth analysis, giving you the confidence to invest wisely. 
• Model Portfolios, Alerts, Forums, Portfolio Tracking, and Much More...

Take Care,

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.