What are we looking for?
Sustainable dividends from Canadian companies that offer significant international exposure, but with little or no NAFTA uncertainty.
The screen
Foreign operations can greatly contribute to a Canadian company's growth. But as illustrated by the contentious renegotiations of the North American free-trade agreement between Canada, the United States and Mexico, that international business can add unexpected risk.
Our search for Canadian companies with significant global exposure – outside of the United States – started with an extensive list of dividend payers. It ended, perhaps tellingly, with a much shorter list of Canadian firms with profitable global operations, and yet limited U.S. exposure.
Our TSI Dividend Sustainability Rating System awards points to a firm based on seven key factors:
- One point for five years of continuous dividend payments – two points for more than five years;
- Two points if those payments have been raised in the past five years;
- One point for management’s public commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to currency exchange rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividend payments;
- One point if the company is a leader in its industry.
Publicly traded companies with 10 to 12 points have the highest sustainability rating, while those with seven to nine points are above average; four to six points, average; and one to three points, below average.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – Pat McKeough's widely followed group of Canadian investment newsletters. They include our award-winning flagship newsletter, The Successful Investor, which covers S&P/TSX composite index stocks. The TSI Dividend Advisor is the newest addition. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated five stocks that are positioned to maintain or raise their dividends. Moreover, they have significant international operations outside the United States.
Insurer Great-West Lifeco Inc., for example, has focused on Ireland for its global expansion. Finning International Inc. sells and services Caterpillar-brand heavy equipment in Canada, South America and Britain, while Bank of Nova Scotia does most of its foreign lending in Latin America and the Caribbean.
AGT Food & Ingredients Inc. buys, processes and distributes a range of pulses – peas, beans, lentils and chickpeas – to international customers mostly outside the United States. Engineering and construction giant SNC-Lavalin Group Inc. also wins most of its foreign contracts overseas. All five of our top stocks appear in the accompanying table.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.