Market Overview

6 High Yield Canadian Dividend Aristocrats On Sale (BNS, CNI, CNQ, CP, ECA, ENB, ENY, EWC, IMO, RBA, SJR, TD, TLM, TRI, TRP, TU)

6 High Yield Canadian Dividend Aristocrats On Sale BNS, CNI, CNQ, CP, ECA, ENB, ENY, EWC, IMO, RBA, SJR, TD, TLM, TRI, TRP, TU

Developed countries such as Canada generate lots of growth from emerging markets, making them a relatively safer way to remain exposed to fast-growing countries without assuming the same degree of risk. However, Greece's debt troubles could slow or even halt growth throughout the world.

Huge S&P 500 Volume This Month
Over the last 12 months, average daily volume for S&P 500 was 5 billion. Followings are 5 highest trading volume days. As you can see, 3 of them occurred in this month:
Date Volume S&P 500 Changes
5/20/2010 8,328,569,600 -3.2%
5/7/2010 9,472,910,400 -1.4%
5/6/2010 10,617,809,600 -3.1%
4/16/2010 8,108,470,400 -1.5%
5/20/2009 8,205,060,000 -0.6%

10% and more pullbacks are common during a bull market and this market is long overdue for such a correction.

Get Defensive with Dividend Aristocrats
Dividend payments account for 30% of total equity return, a value which is expected to move higher as more companies increase their payouts. The S&P/TSX Canadian Dividend Aristocrats index ( consists of 57 stocks consistently increasing dividends every year for at least five years.

6 High Dividend Canadian Companies
From this list, I found 6 stocks with P/E (both trailing and forward) less than 20 and a dividend greater than 3.5%. Their prices were off 9% - 14% from their 52-week highs:
Name (Symbol) Yield P/E Forward P/E Pct from 52-Wk High
Telus (NYSE: TU) 5.5% 12 11 9%
Shaw Communications (NYSE: SJR) 4.9% 16 12 14%
Transcananda (NYSE: TRP) 4.9% 17 14 14%
Bank of Nova Scotia (NYSE: BNS) 4.2% 15 10 11%
Enbridge (NYSE: ENB) 3.8% 13 16 13%
Toronto Dominion Bank (NYSE: TD) 3.7% 17 10 13%

The above 6 companies are in 3 categories: telecom, energy and banks. They are cheap relative to their peers based on trailing P/E, sales or cash flow.

Telecom: Shaw & Telus
The wireless business is still largely about phones, but devices such as tablet computers, e-readers and TELUS TV are fast growing. Consumers are increasingly interested in wireless devices that can surf the Internet, and carriers are trying to tap that interest to offset falling revenue from phones. With multiple devices, customers are likely to end up paying more. In the meantime, Telus & Shaw are trying to grow their earnings and cash flow from expense control and lower capital expenditures.

Energy: Enbridg & Transcananda
China's effort to tighten monetary policy has made investors nervous because this country’s slow growth could spread through the world. If the current downward trend in oil price persists, Canadian energy giants may struggle to generate enough cash flows to fund expansion and increase dividend payouts.

Banks: Bank Nova Scotia & Toronto Dominion Bank
The U.S financial reform bill just passed last Friday could crimp U.S. bank profits. It is unlikely Canadian banks will remain unscratched.

Other Canadian Dividend Aristocrats
Following 8 companies are also in the S&P/TSX Canadian Dividend Aristocrats list and traded in main U.S. exchanges. However, their P/Es are too high (like Thomson Reuters), or yields are too low (less than 3%):
Name (Symbol) Yield P/E
Canadian National Railway (NYSE: CNI) 1.8% 15
Canadian Natural Resources (NYSE: CNQ) 0.4% 18
Canadian Pacific Railway (NYSE: CP) 1.8% 15
Encana (NYSE: ECA) 2.7% 10
Imperial Oil (NYSE: IMO) 1.1% 19
Ritchie Bros. (NYSE: RBA) 2.0% 25
Talisman Energy (NYSE: TLM) 1.4% 85
Thomson Reuters (NYSE: TRI) 3.3% 38

If you don’t like to cherry pick stocks, there are 2 Canadian related ETFs: iShares MSCI Canada Index (NYSE: EWC) and Claymore/SWM Canadian Energy Income (NYSE: ENY).

The debt crisis in Europe will probably force the Fed to keep interest rates low for long, and that will put more pressure on the Bank of Canada to follow suit. We are in a Merry-Go-Around: first was the U.S. financial crisis, now it is European sovereign debt. The next Jack-in-the-Box might be Asia. In this case, the stock market could be flat for the next few years.

Over long periods, dividends are the biggest source of investor returns from equities. The key is to find financially strong companies which can generate enough cash flow to increase their dividends to investors

Disclose: long ECA and TD. Data are from, Google, and Yahoo Finance and is valid as of May 22, 2010.



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