What are we looking for?
Sustainable dividends from Canadian service providers operating in the U.S. and unlikely to attract tariffs.
The screen
Canadian markets were further spooked this week by news the Trump administration plans to saddle Canadian steel and aluminum imports with a 25-per-cent tariff.
Ultimately, it’s uncertain what, if any, tariffs will be imposed next. But investors can help protect their portfolios with a group of Canadian stocks unlikely to draw the attention of the White House.
Specifically, Canadian services providers – as opposed to manufacturers and commodity sellers – have escaped U.S. tariff threats even as the most successful among them continue to expand their client lists in the U.S.
In a trade war, they could nonetheless be subject to any procurement restrictions that the U.S. places on service providers without operations in that country. It’s therefore prudent to seek out Canadian firms that service U.S. clients through their own U.S. operations.
We started our search with a list of Canadian service providers offering dividends. We then singled out those with strong prospects – and significant U.S. operations. (Note: many of these stocks have meagre dividend yields, reflective of their strong share-price gains over the past few years.) From here we 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 for an industry leader.
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, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks.
Montreal-headquartered AtkinsRealis Group Inc. ATRL-T is a leading engineering services and nuclear design and refurbishment company. It generates about 19 per cent of its revenue in the U.S.
FirstService Corp. FSV-T, based in Toronto, has two main businesses: FirstService Residential, which provides an array of property management services, and FirstService Brands, which includes Paul Davis Restoration, CertaPro Painters and California Closets. It generates 87 per cent of its revenue in the U.S.
Colliers International Group Inc. CIGI-T, also based in Toronto, offers a range of services, including helping clients buy and sell commercial real estate, arranging financing and assessing properties for tax purposes. It generates 55 per cent of its revenue in the U.S.
Headquartered in Edmonton, Stantec Inc. STN-T is a leading seller of consulting, project-delivery, design and technology services. It generates 53 per cent of its revenue in the U.S.
Thomson Reuters Corp. TRI-T, based in Toronto, sells specialized information – mainly through electronic channels – to professionals in the legal, and tax and accounting fields. It also owns the Reuters news service. (Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, owns The Globe and Mail.) Thomson Reuters generates 47 per cent of its revenue in the U.S.
And finally, Laval, Quebec-headquartered Alimentation Couche-Tard Inc. ATD-T operates convenience stores, mostly in North America and Europe. The company generates 63 per cent of its revenue in the U.S.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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