In this edition of ‘Stock Teasers’, we are going to be looking at Canadian stock outliers using a unique screener in each edition. The screeners have two main variables, of which will change each time, and the end goal is to find a group of stock outliers on the graph and identify why they might be outliers.

Canadian Stock Outlier Screener

We have used the following variables across the Canadian stock universe: 10-year dividend per share CAGR and 10-year EBIT CAGR. Combining two variables gave investors a good picture of how fast companies grew their dividends, and how much of that growth has been supported along with the growth in fundamentals. By looking at the compounded annual growth rate (CAGR) in earnings before taxes (EBIT) over the last ten years and the dividend per share 10-year growth rate, investors could seek businesses that are potential candidates for dividend growers supported by healthy fundamentals.

We have outlined a set of stocks below that we have identified as ‘outliers’ on the scatter plot and drew special notice to one major outlier. This green-shaded area indicates stocks that offer a combination of strong dividend growth and solid fundamentals improvement over the years.

Let’s take a closer look at some of the stocks which encompass this section of the graph. We can see Open Text Corporation (OTEX), Restaurant Brands International Inc. (QSR), Alimentation Couche-Tard Inc. (ATD), Canadian Natural Resources Limited. (CNQ) and CCL Industries Inc. (CCL.B) are in this area. The common theme between these names is that they do have a great 10-year dividend growth record relative to the rest of the companies.

A brief commentary on recent performance and an overview of what these companies do that may be driving these outlier growth estimates:

Open Text Corporation (OTEX): OTEX is a legacy tech company, the company is currently in the transition process to the cloud through a few large acquisitions, and the company is trading at 8.9x Forward P/E, and growth over the next few years is expected to be in the range of 3%-5%

Restaurant Brands International (QSR): is one of the leading quick-service restaurants in North America with famous brands including Tim Hortons, Burger King, and Popeyes. The company has a solid competitive position due to its well-recognized portfolio of brands. The company is recently buying back shares on top of the attractive dividend yield of 3%, which indicates management believes QSR’s shares are undervalued.

Alimentation Couche-Tard (ATD): ATD operates and licenses convenience stores globally, ATD has a track record of compounding shareholder wealth at an above-average for decades by consolidating the industry. The company grew its dividend consistently over the years, ATD’s 10-year dividend per share growth rate is 23% on average.

Canadian Natural Resources (CNQ): Operates as a natural gas producer, the company possesses unique energy assets with a low-cost base to produce, CNQ generates solid free cash flow and returns most of it to shareholders. In addition to the dividend yield of 4.3%, CNQ is repurchasing shares aggressively. CNQ’s 10-year dividend growth rate is 19%.

CCL Industries (CCL.B): is a world leader in specialty label, security and packaging solutions for global corporations, government institutions, small businesses, and consumers. CCL.B grew strongly over the years through acquisitions, the business has been proven as an above-average compounder with a track record of dividend growth of 20% in the last ten years.

Common Theme Among Canadian Stock Outliers

We hope that readers enjoyed this edition of ‘Stock Teasers’ talking about some of the Canadian stock outliers for 10-year EBIT growth and 10-year dividend growth. A common theme among the stocks we highlighted is these businesses generate meaningful cash flow year after year, these businesses possess strong organic growth profiles and the management teams of these companies tend to have shareholder-friendly policies that are supported by growth in fundamentals. For other editions of our ‘Stock Teasers’, check out this latest blog on Stock Market Gems from /r/CanadianInvestor!

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...