{"id":139416,"date":"2020-01-14T19:58:19","date_gmt":"2020-01-14T19:58:19","guid":{"rendered":"https:\/\/stockchase.com\/discover\/?p=139416"},"modified":"2020-01-15T15:56:27","modified_gmt":"2020-01-15T15:56:27","slug":"top-high-dividend-stocks-canada-is-the-dividend-safe","status":"publish","type":"post","link":"https:\/\/stockchase.com\/discover\/top-high-dividend-stocks-canada-is-the-dividend-safe\/","title":{"rendered":"Top High Dividend Stocks Canada &#8211; Is the Dividend Safe?"},"content":{"rendered":"<p>\u201cIs it safe?\u201d<\/p>\n<p>Dividend investors (and Laurence Olivier)\u00a0<i> <\/i>commonly ask that question.<\/p>\n<p>If you collect dividends, you&#8217;re bound to encounter a stock that plummets and pushes the divvy way\u00a0 past the safety threshold of 4%.<\/p>\n<p>When that happens, a stock risks a dividend cut, sometimes in half, that could slash the stock price as well.<\/p>\n<p>Sometimes, though, investors welcome a dividend cut and will actually drive up a stock.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Discover What&#039;s Inside<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/stockchase.com\/discover\/top-high-dividend-stocks-canada-is-the-dividend-safe\/#How_to_determine_whether_a_dividend_safe\" >How to determine whether a dividend safe?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/stockchase.com\/discover\/top-high-dividend-stocks-canada-is-the-dividend-safe\/#Stocks_with_No_Dividend\" >Stocks with No Dividend<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/stockchase.com\/discover\/top-high-dividend-stocks-canada-is-the-dividend-safe\/#Top_3_Canadian_High_Dividend_Stocks\" >Top 3 Canadian High Dividend Stocks<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"How_to_determine_whether_a_dividend_safe\"><\/span>How to determine whether a dividend safe?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The payout ratio. That metric comes from investment income, net of expenses. Generally, the lower the ratio, the safer. So if Company X has earnings-per-share of $1 and dividends-per-share of $0.70, then Company X&#8217;s payout ratio is 70%. Similarly, if Company J&#8217;s EPS is $1 and pays $0.90 in dividends-per-share, then its payout ratio is 95%.<\/p>\n<p>Which company has a more sustainable payout ratio? Answer: X.<\/p>\n<p>An important note is that payout ratios vary among sectors, with defensive stocks (utilities, pipelines and telcos) having high payout ratios, but which are supported by predictable earnings and cash flows. In contrast, cyclicals (resources, energy) have lower payouts because their earnings fluctuate a lot more (oil stocks are a good example).<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Stocks_with_No_Dividend\"><\/span>Stocks with No Dividend<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Sectors such as tech pay low or no dividends.<\/p>\n<p>Instead, these companies reinvest their earnings in R&amp;D (think <a href=\"https:\/\/stockchase.com\/AMZN-Q\">Amazon<\/a> and <a href=\"https:\/\/stockchase.com\/TSLA-Q\">Tesla<\/a>). A final point is that blue-chip companies increase their dividends annually, but their rising earnings stabilize their payout ratios.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Top_3_Canadian_High_Dividend_Stocks\"><\/span>Top 3 Canadian High Dividend Stocks<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>What follows are dividend stocks that pay high dividend yields.<\/p>\n<p>Can they sustain them?<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-102491\" src=\"https:\/\/stockchase.com\/discover\/wp-content\/uploads\/2019\/09\/Vermilion-Energy-Inc-1-760x254.jpg\" alt=\"Vermilion Energy\" width=\"860\" \/><\/p>\n<p><a href=\"https:\/\/stockchase.com\/VET-T\"><strong>Vermillion<\/strong><strong> Energy<\/strong><\/a><\/p>\n<p>12.8% dividend yield \/ 120% payout ratio<\/p>\n<p>Perhaps no Canadian stock keeps dividend investors up at night as much as <a href=\"https:\/\/stockchase.com\/VET-T\">VET-T<\/a>. Conventional market wisdom says that a double-digit yield is begging to be chopped in half. That would be no surprise for an oil stock.<\/p>\n<p>For example, <a href=\"https:\/\/stockchase.com\/CPG-T\">Crescent Point Energy<\/a> slashed its <span style=\"color: #000080;\"><span lang=\"zxx\"><u><a href=\"https:\/\/www.cbc.ca\/news\/canada\/calgary\/crescent-point-energy-dividend-capital-budget-1.4978519\" target=\"_blank\" rel=\"noopener\">dividend<\/a><\/u><\/span><\/span> four years ago after its dividend skyrocketed. Could the same happen to <a href=\"https:\/\/stockchase.com\/VET-T\">Vermillion<\/a>?<\/p>\n<p><a href=\"https:\/\/stockchase.com\/VET-T\">VET<\/a>&#8216;s payout ratio is a nosebleed 120% vs. the sector&#8217;s 48%, and the dividend is nearly 13% vs. the sector&#8217;s 3.83%.<\/p>\n<p>So, the dividend is doomed, right? &#x1f480;<\/p>\n<p>Not so fast.<\/p>\n<p><a href=\"https:\/\/stockchase.com\/VET-T\">VET<\/a> boasts the highest ROE in oil and gas, 14.02% vs. the sector&#8217;s 5.52%. Its profit margin of 20.41% kills the sector&#8217;s 2.64%. Further, <a href=\"https:\/\/stockchase.com\/VET-T\">VET<\/a>&#8216;s PE is 9.6x while the industry averages 19.7. The key difference with <a href=\"https:\/\/stockchase.com\/VET-T\">VET<\/a> is that it fetches higher European natural gas prices.<\/p>\n<p>So, it&#8217;s safe, right? Maybe not. &#x1f914;<\/p>\n<p><a href=\"https:\/\/stockchase.com\/expert\/view\/1313\/Greg-Newman\">Greg Newman<\/a> points out its -4% EPS growth. <a href=\"https:\/\/stockchase.com\/expert\/view\/42\/Michael-Sprung\">Michael Sprung<\/a> thinks the dividend is safe if the price of oil doesn&#8217;t plunge. That&#8217;s a big if. <a href=\"https:\/\/stockchase.com\/expert\/view\/1326\/Ryan-Bushell\">Ryan Bushell<\/a> owns <a href=\"https:\/\/stockchase.com\/VET-T\">Vermillion<\/a>&#8230;.nervously.<\/p>\n<p><i>Safe, nervously.<\/i><\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-139576\" src=\"https:\/\/stockchase.com\/discover\/wp-content\/uploads\/2020\/01\/CHE.UN-T-1-760x254.jpg\" alt=\"CHE.UN-T stock chart\" width=\"860\" \/><\/p>\n<p><a href=\"https:\/\/stockchase.com\/CHE.UN-T\">Chemtrade Logistics Income Fund<\/a><\/p>\n<p>10.71% dividend yield \/ NA payout ratio<\/p>\n<p>If I had written this article six months ago, <a href=\"https:\/\/stockchase.com\/CHE.UN-T\">CHE.UN<\/a>&#8216;s dividend would been unsafe with its high payout ratio hitting 127% against deep debt. Today, <a href=\"https:\/\/stockchase.com\/expert\/view\/28\/Robert-McWhirter\">Robert McWhirter<\/a> is one analyst who has changed his tune, citing <a href=\"https:\/\/stockchase.com\/CHE.UN-T\">Chemtrade<\/a>&#8216;s free cash flow that he expects to grow 9% this year.<\/p>\n<p>In fact, <a href=\"https:\/\/stockchase.com\/expert\/view\/28\/Robert-McWhirter\">McWhirter<\/a> foresees 19% upside in the stock price. <a href=\"https:\/\/stockchase.com\/expert\/view\/1313\/Greg-Newman\">Greg Newman<\/a> isn&#8217;t a convert, but is keeping an eye on <a href=\"https:\/\/stockchase.com\/CHE.UN-T\">CHE.UN<\/a> as it sells some assets to pay down its debt.<\/p>\n<p><a href=\"https:\/\/stockchase.com\/expert\/view\/1399\/Cole-Kachur\">Cole Kachur<\/a> is confident in the dividend, but warns that a recession will slash it.<\/p>\n<p>It looks like things are looking up for <a href=\"https:\/\/stockchase.com\/CHE.UN-T\">Chemtrade<\/a> as more analysts make buy signals, a pivot that began last fall, but <a href=\"https:\/\/stockchase.com\/CHE.UN-T\">CHE.UN<\/a>&#8216;s metrics remain worrisome.<\/p>\n<p>Its gross and net margins are distinctly lower than its peers.<\/p>\n<p>Same goes with its returns, with ROE -19.84% vs. -2.09%.<\/p>\n<p>Yet, its dividend yield is twice the sector average. Things are improving, sure, but this remains an unprofitable company.<\/p>\n<p><i>Unsafe, but watch this stock.<\/i><\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-139987\" src=\"https:\/\/stockchase.com\/discover\/wp-content\/uploads\/2020\/01\/AD-T-1-760x254.png\" alt=\"AD-T stock chart\" width=\"860\" \/><\/p>\n<p><a href=\"https:\/\/stockchase.com\/AD-T\">Alaris Royalty<\/a><\/p>\n<p>7.41% dividend yield \/ 83.55% payout ratio<\/p>\n<p>Like Chemtrade, <a href=\"https:\/\/stockchase.com\/AD-T\">Alaris<\/a> is a stock that&#8217;s endured a rough patch in recent years. This royalty company suffered when investments in some private companies went south. However, the company has has been slowly rebounding since May 2017 as it recovered some payments and made some wise investments. In the last six months, <a href=\"https:\/\/stockchase.com\/AD-T\">AD-T<\/a> has leapt by 15.5% and has reduced its dividend to 7.41% from 8.14% in July 2019.<\/p>\n<p><a href=\"https:\/\/stockchase.com\/expert\/view\/42\/Michael-Sprung\">Michael Sprung<\/a> firmly believes that not only is the divvy safe, but will increase this year and next, based on a strong cash flow.<\/p>\n<p><a href=\"https:\/\/stockchase.com\/expert\/view\/1366\/Ryan-Modesto\">Ryan Modesto<\/a> agrees with this outlook, but doesn&#8217;t feel as secure about the dividend.<\/p>\n<p>In contrast, <a href=\"https:\/\/stockchase.com\/expert\/view\/1344\/Stephen-Takacsy-B-Eng-MBA\">Stephen Takacsy<\/a> is bearish, complaining that <a href=\"https:\/\/stockchase.com\/AD-T\">Alaris<\/a> holds too many companies, which are hard to value based on <a href=\"https:\/\/stockchase.com\/AD-T\">Alaris<\/a>&#8216; financial statements. Tech analyst <a href=\"https:\/\/stockchase.com\/expert\/view\/1427\/Javed-Mirza\">Javed Mirza<\/a> gives <a href=\"https:\/\/stockchase.com\/AD-T\">AD<\/a> a thumbs-up, noting on its chart an ascending triangle during its current breakout. Bruce Campbell doesn&#8217;t hold this stock, but its debenture instead, and suggests buying <a href=\"https:\/\/stockchase.com\/AD-T\">AD-T<\/a> on pullback at $19, instead of current levels.<\/p>\n<p>Mind you, <a href=\"https:\/\/stockchase.com\/AD-T\">AD<\/a>&#8216;s payout ratio of nearly 84% is more than three times more than the sector&#8217;s 26.28%. But the dividend should be safe as the company has made more prudent investments.<\/p>\n<p>In fact, <a href=\"https:\/\/stockchase.com\/AD-T\">Alaris<\/a> boasts one of the highest ROEs in the investment services space, with a profit margin of 63.47% vs. 8.88%.<\/p>\n<p><i>Safe. (Disclosure: I own Alaris.)<\/i><\/p>\n<p>You can find more <a href=\"https:\/\/stockchase.com\/discover\/high-dividend-stocks\/\">Canadian dividend stock ideas<\/a> in our <a href=\"https:\/\/stockchase.com\/discover\/high-dividend-stocks\/\">Fast-Rising High Dividend Stocks<\/a> post, in <a href=\"https:\/\/stockchase.com\/discover\/dividend-stocks-flying-high-but-risky\/\">Dividend stocks: Flying high, but risky?<\/a> or the <a href=\"https:\/\/stockchase.com\/discover\/top-7-canadian-bank-stocks-that-pay-dividends\/\">Top 7 Canadian Bank Stocks that Pay Dividends<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cIs it safe?\u201d Dividend investors (and Laurence Olivier)\u00a0 commonly ask that question. If you collect dividends, you&#8217;re bound to encounter a stock that plummets and pushes the divvy way\u00a0 past the safety threshold of 4%. When that happens, a stock [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":139575,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cwp_meta_box_check":"No","cwp_rev_product_name":"","cwp_rev_product_image":"","wppr_links":[],"cwp_rev_price":"","wppr_options":[],"wppr_pros":[],"wppr_cons":[],"footnotes":""},"categories":[17],"tags":[],"class_list":["post-139416","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lists"],"wppr_data":{"cwp_meta_box_check":"No"},"_links":{"self":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/139416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/comments?post=139416"}],"version-history":[{"count":0,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/139416\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media\/139575"}],"wp:attachment":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media?parent=139416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/categories?post=139416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/tags?post=139416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}