dividend kings

A reader has prompted me to update this post (originally posted in 2016).

Dividend growth investing may not be for everyone, but I am a fan.  I like the idea of receiving tax efficient payments from long-established companies with a track record of annually increasing their payments to shareholders.

I also like the idea of getting paid to wait. When the market crashes like it did during the covid-19 pandemic, most of my Canadian dividend growth stocks kept paying their dividend. My dividend portfolio value was down, but my cash was growing nonetheless. This is the true power of dividend growth investing.

Dividend Aristocrats and Dividend Kings improve your portfolio performance

In fact, many studies (such as Vanguard) have proven that dividend growers are likely to outperform the market and do it with less volatility. Dividend growers such as the best Canadian dividend aristocrats will continue to increase their dividend in 2020.

Canadian companies with a long history of dividend growth will generally show a strong business model and robust financials. They have gone through many recessions and never stopped increasing dividend payments. In times of confusion and fear, you can go back and look at how companies went through the past crisis and kept their dividend streak alive. 

I use the dividend strategy for my leveraged portfolio, a significant portion of my RRSP, and our corporate portfolio.  We currently collect a little over $50,000/year in dividends and if you are interested, you can follow my dividend updates here. You can also view the best Canadian dividend stock picks for this year here.

In the past, I’ve written a number of articles on dividend growth stocks, I’ve never properly categorized them. Here are the most common terms on the U.S. stock market:

  • Dividend Achiever is a company that has increased its dividend at least 10 years in a row;
  • A Dividend Contender is a company traded in the U.S. that has raised dividends between 10 to 24 consecutive years.
  • A Dividend Champion is a company that has increased its dividend at least 25 years in a row (regardless if it is part of the S&P 500 or not);
  • Dividend Aristocrat is a company that is part of the S&P 500 and that has increased its dividend at least 25 years in a row;
  • Dividend King is a company that has increased its dividend at least 50 years in a row.  The true cream of the crop.

Dividend Aristocrats and Dividend Kings in Canada

Here in Canada, we have a relatively small market and an even smaller list of quality dividend stocks.  In a previous article about the top Canadian dividend growth stocks, you will see a number of dividend achievers (10 years + ), a handful of dividend aristocrats (25 years +), but no dividend kings in Canada (although FTS (46) and CU (47) are getting close).

As of March 2019

Company Symbol Years 10 year avg Growth Rate Payout Ratio Current Yield
Canadian Utilities CU 47  9% 122.5% 4.77%
Fortis Inc. FTS 45 5.6% 72.45% 3.60%
Toromount Industries Ltd TIH 29  11.3% 35.18% 1.56%
Canadian Western Bank CWB 27  9.0% 37.24% 3.40%
Atco Ltd ACO.X 25  12.4% 90.69% 3.58%
Thomson Reuters TRI 25  2.5% 575.79% 2.65%
Empire Company Ltd EMP.A 24  6.6% 36.47% 1.44%
Imperial Oil IMO 24  6.7% 26.40% 2.14%
Metro Inc MRU 24  16% 31.9% 1.62%
Canadian National Railway CNR 23  14.7% 36.62% 1.89%
Enbridge Inc ENB 23  15.1% 204.77% 5.42%
Saputo Inc SAP 19  12%  33.96% 1.52%
Canadian Natural Resources CNQ 18  21%  43.75% 3.52%
SNC Lavalin SNC 16  14%  60.67% 1.93%
TransCanada Corp TRP 18  6.7%  80.31% 5.05%
Canadian REIT REF.UN 15  3.5%  88.63% 3.98%
CCL Industries CCL.B 17  16.6%  25.92% 1.25%
Finning International FTT 17  6.3%  58.14% 3.21%
Transcontinental Inc. TCL.A 17  10.3%  33.54% 4.36%
Plaza Retail REIT PLZ.UN 16  4.8%  240.3% 6.76%
Ritchie Bros Auctioneers RBA 16  7.5%  52.73% 1.96%
Suncor Energy SU 16  21.8%  83.58% 3.69%
Cogeco Communications Inc. CCA 15  16.6%  29.81% 2.48%
Telus Corporation T 15  8.7%  81.37% 4.63%

 

Canadian Dividend Aristocrat Definition

While I used the terms dividend achievers and dividend aristocrats for the Canadian stock market  in the previous section, I must highlight that the official definition of the Canadian dividend aristocrat differs from the one established in the U.S.

In order to be considered as a S&P Canadian Dividend Aristocrat, the company must have increased its dividend payout every year for five years but have a free way and is still eligible if the company maintains the same dividend payout for a maximum of 2 years. Therefore, we are looking at stocks that have a good potential for raising its dividend but still pretty far away from 25 consecutive years.

Dividend kings list

In a few years, we will be able to have short list of Canadian dividend kings (including Fortis and Canadian Utilities). In the meantime, where do we find these elusive dividend kings? You’ll have to look at the biggest market in the world – the US!  In the US, there are 30 dividend kings that have increased their dividend at least 50 years in a row.  

Here is a table supplied by Dividend Stocks Rock:

Ticker Name Dividend Yield Market Cap ($M)
JNJ Johnson & Johnson 2.96% $339,608
PG Procter & Gamble Co. 2.48% $303,819
KO The Coca-Cola Co. 2.87% $235,652
MMM 3M Co. 3.55% $90,635
LOW Lowe’s Cos., Inc. 1.96% $83,948
CL Colgate-Palmolive Co. 2.32% $63,492
TGT Target Corp. 2.47% $54,406
EMR Emerson Electric Co. 3.29% $35,571
HRL Hormel Foods Corp. 1.97% $22,582
PH Parker-Hannifin Corp. 2.12% $20,458
SWK Stanley Black & Decker, Inc. 2.08% $19,774
CINF Cincinnati Financial Corp. 1.99% $18,147
DOV Dover Corp. 2.09% $13,203
GPC Genuine Parts Co. 3.38% $12,943
FRT Federal Realty Investment Trust 3.25% $9,679
NDSN Nordson Corp. 1.12% $7,657
CBSH Commerce Bancshares, Inc. (Missouri) 1.82% $6,087
LANC Lancaster Colony Corp. 1.78% $3,934
AWR American States Water Co. 1.32% $3,366
CWT California Water Service Group 1.40% $2,686
ABM ABM Industries, Inc. 1.93% $2,427
TR Tootsie Roll Industries, Inc. 0.95% $2,400
NWN Northwest Natural Holding Co. 2.66% $2,148
SCL Stepan Co. 1.05% $2,140
SJW SJW Group 1.76% $1,897
FMCB Farmers & Merchants Bancorp (California) 1.81% $600

Sources: bigcharts.com; Sure Dividend; Dividend Growth Investor.

Here is the same table sorted by yield:

Ticker Name Dividend Yield Market Cap ($M)
MMM 3M Co. 3.55% $90,635
GPC Genuine Parts Co. 3.38% $12,943
EMR Emerson Electric Co. 3.29% $35,571
FRT Federal Realty Investment Trust 3.25% $9,679
JNJ Johnson & Johnson 2.96% $339,608
KO The Coca-Cola Co. 2.87% $235,652
NWN Northwest Natural Holding Co. 2.66% $2,148
PG Procter & Gamble Co. 2.48% $303,819
TGT Target Corp. 2.47% $54,406
CL Colgate-Palmolive Co. 2.32% $63,492
PH Parker-Hannifin Corp. 2.12% $20,458
DOV Dover Corp. 2.09% $13,203
SWK Stanley Black & Decker, Inc. 2.08% $19,774
CINF Cincinnati Financial Corp. 1.99% $18,147
HRL Hormel Foods Corp. 1.97% $22,582
LOW Lowe’s Cos., Inc. 1.96% $83,948
ABM ABM Industries, Inc. 1.93% $2,427
CBSH Commerce Bancshares, Inc. (Missouri) 1.82% $6,087
FMCB Farmers & Merchants Bancorp (California) 1.81% $600
LANC Lancaster Colony Corp. 1.78% $3,934
SJW SJW Group 1.76% $1,897
CWT California Water Service Group 1.40% $2,686
AWR American States Water Co. 1.32% $3,366
NDSN Nordson Corp. 1.12% $7,657
SCL Stepan Co. 1.05% $2,140
TR Tootsie Roll Industries, Inc. 0.95% $2,400

As you can see from the list, some of these names are very recognizable with global brand awareness and long term competitive advantage.  Names such as Procter & Gamble, Coke, Johnson & Johnson, 3M, Colgate, and Lowe’s.

You will also notice that most of them show a low dividend yield. From this list, only Altria (MO) shows a yield over 5% (~8.78%). The dividend king average yield is 2.74% with an average dividend growth of 6.50%. This shows you that one must pay for the quality. Finally, most dividend growers will not only reward shareholders with dividend increases, but also with steady capital appreciation.

As a disclaimer, I hold the following dividend kings within my RRSP: Procter & Gamble; 3M; Emerson Electric; Coca-Cola; Target; and, Johnson & Johnson.  Also, this post is not meant to provide recommendations for your portfolio, but a starting point for your research.

Taking Dividend Investing to The Next Level:

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