Canadian Dividend Aristocrats and iShares’ CDZ
The 59 stocks that make up the Canadian dividend aristocrats are a good starting point for investors who are hunting for yield. These stocks must have increased their dividends for at least five consecutive years to make the aristocrats list.
Becoming a dividend aristocrat shows that company management is committed – for better or worse – to giving money back to shareholders. The benchmark is much less difficult to achieve in Canada than in the U.S., where it takes 25 consecutive years of dividend growth to make the cut.
Related: Why U.S. Stocks Are Safer Than Canadian Stocks
Bear in mind that the past five years still includes 2008-2009, a period when many dividend stocks, including stalwarts like the big banks, did not increase distributions in the wake of the global financial crisis.
That said, the dividend aristocrats list didn’t see much of a shake-up this year, with five new additions (CAE Inc., Evertz Technologies, Laurentian Bank, Major Drilling Group, and Stella Jones Inc.) and just two companies removed from the list (Fairfax Financial, and Kinross Gold).
Canadian Dividend Aristocrats 2013 List
Here are the 59 companies that make up the Canadian Dividend Aristocrats, along with their current dividend yield, and the number of years of consecutive dividend increases.
| Symbol | Company | Years of Div increases | Current yield |
| FTS | FORTIS INC. | 39 | 4.01% |
| CU | CANADIAN UTILITIES LTD. | 30 | 2.71% |
| CWB | CANADIAN WESTERN BANK | 21 | 2.32% |
| TRI | THOMSON REUTERS CORP. | 19 | 3.79% |
| ACO.X | ATCO LTD. | 19 | 1.66% |
| ESI | ENSIGN ENERGY SERVICES INC. | 18 | 2.50% |
| MRU | METRO INC. | 18 | 1.55% |
| EMP.A | EMPIRE CO. LTD. | 18 | 1.39% |
| IMO | IMPERIAL OIL LTD. | 18 | 1.08% |
| ENB | ENBRIDGE INC. | 17 | 3.01% |
| CNR | CANADIAN NATIONAL RAILWAY | 17 | 1.62% |
| AGF.B | A.G.F. MANAGEMENT | 15 | 8.55% |
| HCG | HOME CAPITAL GROUP | 14 | 1.53% |
| SAP | SAPUTO INC. | 13 | 1.71% |
| TRP | TRANSCANADA CORP. | 12 | 4.17% |
| SNC | SNC-LAVALIN GROUP | 12 | 2.06% |
| CNQ | CANADIAN NATURAL RESOURCES | 12 | 1.55% |
| REF.U | CANADIAN REIT | 11 | 4.09% |
| TCL.A | TRANSCONTINENTAL INC. | 11 | 3.77% |
| FTT | FINNING INTERNATIONAL | 11 | 2.57% |
| CCL.B | CCL INDUSTRIES INC. | 11 | 1.24% |
| SJR.B | SHAW COMMUNICATIONS | 10 | 4.13% |
| CJR.B | CORUS ENTERTAINMENT INC. | 10 | 4.08% |
| RBA | RITCHIE BROS AUCTIONEERS | 10 | 2.59% |
| PSI | PASON SYSTEMS INC. | 10 | 2.31% |
| SU | SUNCOR ENERGY INC. | 10 | 2.18% |
| CCO | CAMECO CORP COM | 10 | 2.13% |
| T | TELUS CORP. | 9 | 4.03% |
| CMG | COMPUTER MODELLING GRP. | 9 | 3.01% |
| CCA | COGECO CABLE INC. | 9 | 2.10% |
| CP | CANADIAN PACIFIC RAILWAY | 9 | 1.09% |
| RCI.B | ROGERS COMMUNICATIONS | 8 | 3.93% |
| IFC | INTACT FINANCIAL CORP. | 8 | 2.82% |
| SCL | SHAWCOR LTD. | 8 | 1.14% |
| SJ | STELLA-JONES INC. | 8 | 0.73% |
| BDT | BIRD CONSTRUCTION INC. | 7 | 6.02% |
| THI | TIM HORTONS INC. | 7 | 1.77% |
| EMA | EMERA INC. | 6 | 4.74% |
| ET | EVERTZ TECHNOLOGIES LTD. | 6 | 3.51% |
| CSU | CONSTELLATION SOFTWARE | 6 | 2.28% |
| PJC.A | JEAN COUTU GROUP | 6 | 1.84% |
| LB | LAURENTIAN BANK | 5 | 4.45% |
| MDI | MAJOR DRILLING GROUP INT. | 5 | 2.73% |
| CAE | CAE INC | 5 | 1.80% |
| EIF | EXCHANGE INCOME CORP. | 3 | 7.71% |
| NPR.U | NORTHERN PROPERTY REIT | 3 | 5.84% |
| DII.B | DOREL INDUSTRIES INC. | 3 | 3.40% |
| IGM | IGM FINANCIAL INC. | 2 | 4.48% |
| BNS | BANK OF NOVA SCOTIA | 2 | 4.21% |
| TD | TORONTO-DOMINION BANK | 2 | 3.40% |
| SC | SHOPPERS DRUG MART | 2 | 1.92% |
| MX | METHANEX CORP. | 2 | 1.54% |
| CTC.A | CANADIAN TIRE CORP. | 2 | 1.53% |
| AFN | AG GROWTH INTERNATIONAL | 1 | 5.95% |
| ENF | ENBRIDGE INCOME FUND | 1 | 5.71% |
| CGX | CINEPLEX INC. | 1 | 3.67% |
| KEY | KEYERA CORP. | 1 | 4.18% |
| RET.A | REITMANS (CANADA) | n/a | 10.82% |
| TLM | TALISMAN ENERGY INC. | n/a | 2.22% |
iShares Dividend Aristocrat ETF – CDZ
It can be a daunting task to comb through 59 companies to find a stock worth owning. In that case, consider the iShares ETF, CDZ, which tracks the Canadian dividend aristocrats index listed above and uses the following criteria to qualify:
- Must be common stock or income trust listed on the TSX and in the S&P Canada Broad Market Index (BMI);
- Must have increased dividends every year for five years, but can maintain the same dividend for a maximum of two consecutive years within that 5-year period;
- Must have a minimum $300 million market capitalization.
I measure my own portfolio of individual stocks against the performance of CDZ because I use a similar strategy of buying and holding dividend growth stocks. Unlike the rigid formula that CDZ uses to select stocks, I use my own judgement to decide which dividend stocks to buy and hold.
Related: Should You Buy A Dividend ETF?
I want to avoid the dogs (see AGF and Reitmans); companies with high dividend payout ratios that have increased dividends at the expense of growing their business, and may now be in financial trouble. By rule CDZ cannot exclude these types of companies and so its performance may suffer because of a few bad apples.
CDZ has a management expense ratio of 0.66 percent. The average annual return for CDZ since inception in 2007 is 6.32 percent. Its worst year was 2008 when it lost 30.49 percent, and its best year was in 2009 when it gained 38.2 percent. Year-to-date in 2013 the fund has returned 6.18 percent. In comparison, my own portfolio is up 7.07 percent so far this year.
Investors will get a monthly distribution of about 6.6 cents per month, which works out to a 3.45 percent yield.
For all the talk about how the Canadian stock market is poorly diversified, CDZ is reasonably balanced in that respect. Financials make up 22 percent of the fund, industrials make up 20 percent, consumer discretionary stocks make up 17 percent, and energy stocks make up 16 percent of the fund.
That’s a stark contrast to the other iShares dividend ETF, XDV, where financials make up 53 percent of its holdings.
Final thoughts
I use the dividend aristocrats index as a starting point for my research on which dividend stocks to buy. I’m not a fan of the 5-year measuring stick for increasing dividends – instead I prefer a longer track record of dividend growth and solid share performance.
Related: 6 Reasons To Buy Dividend Growth Stocks
Using a dividend ETF like CDZ makes sense if you don’t want to build a portfolio of individual stocks. Just keep in mind some of the limitations of the fund that I described above and know that your distributions are not guaranteed to increase each year, even though the fund holds dividend growth stocks. That’s because the holdings may change from year-to-year and that when a high yield stock like AGF is forced to cut or hold its dividend, they’ll be removed from the list and may be replaced by a lower yield dividend growth stock, like Saputo, for example.
The bottom line: if you’re a dividend investor then you should check out the dividend aristocrat list, either to get ideas for your portfolio of individual stocks or to get your dividend fix with an ETF like CDZ.
Robb, that was an excellent summary of what to look for in the stock market. I could see the horizon while reading your article. Thank you.
Thanks Ed, I’m glad you enjoyed the article.
Many thanks for this analysis, Robb
I’m the happy owner of Fortis due to one of your prior articles and because an electric power provider is as close to recession-proof as I could find.
From the above list, I’m taking a closer look at A.G.F. Management.
While not guaranteed, dividend aristocrats are far superior to speculative “trend du jour” investments!
@CanadianDaniel – thanks for the kind words. AGF concerns me because of the high yield. I’d be careful with that one.
Thanks for your article and list! As you probably know several of the companies listed raise their dividends minimally so they can remain on this list. I insist the core of my dividend growth stocks dividend growth rate (DGR) exceeds the inflation rate or they are replaced. It would be interesting if you could include 3 and 5 year DGRs for each stock on your aristocrats list.
@Bernie – Thanks! I’m somewhat limited in my chart making ability (too many columns really mess with the site!), but I will definitely do a follow up post that shows the 5-year dividend growth rates, which I agree are really important criteria.
You can find a list of the Canadian Dividend All-Stars here: http://www.dividendgrowthinvestingandretirement.com/canadian-dividend-all-star-list/. It’s an excel file that you can download for free that has all the Canadian companies that have increased their dividend for 5 or more consecutive years in a row. It’s not exactly the same list as discussed, but its very similar so it has most of the companies mentioned in this article.
It has the 1, 3, 5 and 10 year dividend growth rates. Other useful information is the dividend history for each company going back 10 years, as well as the highest yields for the past 10 years.
I like to compare the current yield to the 5 and 10 year highest yield averages to see what stocks might be under valued.
Hi,
I have the above in my portfolio but you have confused me somewhat. You say These stocks must have increased their dividends for at least five consecutive years to make the aristocrats list.
On the list are company’s that only show growth for 1 year. What am I missing?
Interesting article. Thanks
DW
@David W – The list of stocks was taken right from the holdings of the dividend ETF, CDZ. They’ve tweaked their criteria somewhat to say that companies:
“Must have increased dividends every year for five years, but can maintain the same dividend for a maximum of two consecutive years within that 5-year period”
For example, here are the payouts for Canadian Tire for the past six years:
2008 – 81.5 cents per share
2009 – 84 cents per share
2010 – 84 cents per share
2011 – $1.10 per share
2012 – $1.20 per share
2013 – $1.40 per share
As Bernie mentioned above, a good benchmark is the 5-year dividend growth rate. Canadian Tire has increased its dividends at an annual rate of 11.59% for the past five years, even though it did not increase dividends in 2010.
Thanks for that. BTW I already have this ETF.
Good post.
For folks that don’t like to own these stocks, CDZ is a great product.
To save 30 basis points on the MER, with higher yield, I prefer ZDV as the best dividend ETF.
I agree with your assessment, AGF and others are dogs. I would never own AGF on its own.
XDV is too heavy in financials, also agree. Might as well just own all the bank stocks themselves. 🙂
Mark
Good post. Quick question – do you feel safer investing in Canadian dividend aristocrats or American?
@Janine – Both groups have their stars and dogs, so I don’t think it’s a question of which list is safer – you have to do your research. Obviously the American list has stricter criteria (25 years vs. five) than the Canadian dividend aristocrats, but as Bernie mentioned upthread, companies can raise dividends by a penny just to remain on the list. Probably not the most prudent management strategy.
Janine,
Canadian stocks make up about 4% of the global universe whereas the U.S. stock footprint is close to 50%. As Echo noted there are stars & duds in both these spaces. I hold U.S., Canadian & International stocks.
If you’re new to investing I suggest doing much research before jumping into individual stocks. In the meantime you could go lower risk, lower stress with diversified dividend growth mutual funds or ETFs, such as CDZ mentioned above. Bear in mind that even though dividend stocks are less volatile their ride may be rougher than what your risk tolerance allows. CDZ’s average annual return over the past 5 years may be 11.8% but their return in 2008 was -30.0%.