What are we looking for?
Canada’s investment landscape has long favoured dividend-paying stocks, thanks in large part to the dominance of sectors such as banking, utilities and telecommunications – industries known for their robust dividend payouts. With the S&P/TSX Composite Index reaching new record highs this week, we used Trading Central’s Quantamental analysis to identify leading Canadian stocks that offer compelling dividend yields with a strategy that outperforms the index.
The screen
We used Trading Central’s Strategy Builder to identify Canadian stocks with standout dividend characteristics.
Our screening process began with a focus on companies with a market capitalization of at least $2-billion, ensuring we targeted the country’s largest and most stable firms.
To highlight stocks that offer meaningful income, we filtered for a dividend yield of 4 per cent or higher.
To further refine for dividend sustainability, we required a minimum Trading Central Income factor rating of 60 out of 100, a threshold that reflects strength in current yield, dividend growth and payout ratio compared to industry peers.
We also insisted on a positive five-year average dividend growth rate, signalling a consistent track record of increasing payouts.
For added context, we included each stock’s year-to-date and one-year performance, as well as its price-to-earnings ratio.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
Topping our list is Toronto-Dominion Bank TD-T, Canada’s second-largest bank by market capitalization, which stands out for its blend of stability, income potential and solid fundamentals. TD trades at a relatively low price-to-earnings ratio of 9.96 and offers a dividend yield of 4.38 per cent, appealing to investors who seek value and steady income. With a Trading Central Income Factor Rating of 66 and a five-year dividend growth rate of 6.61 per cent, TD demonstrates a commitment to rewarding shareholders.
Telus Corp T-T, a leading Canadian telecommunications company, offers the highest dividend yield in our screen at 7.58 per cent, making it especially attractive for income-seeking investors. The stock also boasts a top Trading Central Income Factor Rating of 75, reflecting the strength and sustainability of its dividend relative to industry peers. Over the past five years, Telus has delivered a dividend growth rate of 6.41 per cent.
Standing out for its exceptional dividend growth is Peyto Exploration & Development Corp. PEY-T, a Calgary-based natural gas producer. Peyto boasts the highest five-year dividend growth rate on our list at an impressive 68.86 per cent. The company offers a robust dividend yield of 6.65 per cent. The stock also has a solid Trading Central Income Factor Rating of 68, indicating both the quality and sustainability of its dividend. Year-to-date, the stock has gained 16.4 per cent, and it’s up 29.6 per cent over the past year.
Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had an 18 per cent annualized return compared to 11 per cent for the S&P/TSX Composite.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
