Once a year, we will look at the list of monthly dividend payers. The dream of income-seeking investors is to own a diversified portfolio of stable, sustainable dividend growth companies, no matter what happens in the macro environment. At the end of the day, it is not earnings or cash flow, etc. that the investment community pays attention to, but dividends, the “real cash” that investors can spend. 

A quarterly dividend policy is the most common frequency for the vast majority of public companies. However, waiting three months for a “dividend paycheque” does not sound so exciting to investors who are looking for income. Understanding those needs, a few Canadian companies have adopted a monthly dividend policy to target this shareholder base.

Uncertainty is the only certainty in the business world. Various factors like competition, technological disruption, tariffs, etc., could affect a company’s operating results. Though the business environment is anything but stable, there are very few businesses that are resilient and consistent enough to maintain a monthly dividend policy.

These companies tend to have recurring revenue, as they provide critical products/services to their customers, essentially a subscription-like business model, which investors highly value. Companies with consistent and growing dividends year after year, despite any macro environment, signal to investors that they may possess some sustainable competitive advantages that are difficult for competitors to replicate. This consistency demonstrates the sustainability of the business model.

Companies that pay monthly dividends are well aware that their shareholder base values income and stability more than growth and capital gains. As a result, maintaining a track record of paying and growing dividend payments over a multi-year period is crucial.

A competitive dividend yield along with a monthly cheque is the hallmark for this shareholder base, which becomes more valuable, particularly amid a declining interest rate environment. We have filtered a small subset of companies that pay monthly dividends, along with healthy growth in dividends per share over the years.

Below, we have screened for companies with the following criteria:

• Pay monthly dividends
• 5-year compounded annual growth rate (CAGR) in dividend per share of at least 3%
• Market cap larger than $200 million
• 10-year EBIT CAGR of at least 3%
• Dividend yield

The criteria above reflect companies that paid monthly dividends. In addition, these companies grew their dividend per share by at least a 3% compounded annual growth rate (CAGR) in the last five years, which is in line with historical inflation. Secondly, we like to see the dividend growth largely supported by a growth in fundamentals, as we don’t recommend investors own something that is in a secular decline. Therefore, we have screened for companies with EBIT growth in the last 10 years of at least 3%. The criterion itself is not hard to achieve; however, maintaining a positive EBIT growth while paying most of the earnings as dividends is still a respectable record.

The screener results in 11 names within the Canadian equities universe. It is understandable that the majority of them operate in the real estate, energy and industrials industries, mainly because the economics of these industries are sustainable over time. Additionally, it is important to note that although consistent dividend payment is a good sign, investors need to ensure the growth in dividend payment going forward is supported by growing the business, when investors need to make sure on a case-by-case basis.

Members will recognize some of the names that we cover in our Model Portfolios and coverage lists, such as Savaria Corporation (SIS), Exchange Income Corporation (EIF).

Lastly, these companies on the list are not recommendations, but rather a starting point that helps investors generate potential investment ideas.

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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.