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What are we looking for?

Sustainable dividends from Canadian insurance companies tapping into strong economic growth abroad.

The screen

Forecasts for Canadian economic growth remain positive for 2019, although troubles in the Alberta oil sands threaten to zap some of that energy. This country’s insurers – from those selling life insurance to those offering auto coverage – continue to streamline their operations to counteract any slowdown. What’s more, the top among them are cutting risk by diversifying internationally.

Asia, with its growth outlook buoyed by an expanding and underserved middle class, is a primary target.

Our search started with Canadian insurance stocks offering both strong growth prospects and geographic diversity. We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency 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 sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated five stocks. Manulife Financial Corp. and Sun Life Financial Inc. are both active in the United States as well as Asian markets. These include mainland China, Hong Kong, India, the Philippines, Singapore and Vietnam. Great-West Lifeco Inc.’s international operations focus on the United States and Europe – especially Ireland. Intact Financial Corp. is Canada’s largest provider of property and casualty insurance. Last year it made its first move into the U.S. market with the big US$1.7-billion acquisition of OneBeacon Insurance Group Ltd. Power Financial Corp. owns 67.7 per cent of Great-West Lifeco, not to mention 61.4 per cent of IGM Financial Inc., Canada’s largest independent mutual-fund provider.

We advise investors to do additional research on investments we identify below.

Select dividend-paying insurance companies

Ranking* Company Ticker Dividend Sustainability Rating Points Dividend Yield (%) Market cap ($Bil) Recent Price ($) 1Yr Total Return (%)
1 Great-West Lifeco Inc. GWO-T Above Average 9 5.1 29.9 30.55 -13.5
2 Manulife Financial Corp. MFC-T Above Average 9 4.5 43.6 22.02 -18.6
3 Sun Life Financial Inc. SLF-T Above Average 9 4.1 28.8 49.00 -2.6
4 Intact Financial Corp. IFC-T Above Average 8 2.7 14.3 103.44 -4.4
5 Power Financial Corp. PWF-T Above Average 7 6.2 20.0 28.07 -21.3

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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