WHAT ARE WE LOOKING FOR? It seems we can't write about good dividend stocks often enough at Globe Investor. Today, let's look for stocks with the best chances of a rising dividend according to Bloomberg.
MORE ABOUT TODAY'S SCREEN Bloomberg has a formula that it uses to try to predict dividend growth rates for the next three years. Here is how it works.
The formula takes into account such factors as company guidance, industry analysis, historical trends and analyst estimates. It also factors in some esoteric measures, such as option market implied dividends and historical regression analysis of fundamentals compared with dividends.
Finally, Bloomberg calculates something called the Bloomberg Dividend Directional Thermometer (DDT) score.
It's a reading from -100 to +100 using various fundamental, credit rating and company health data.
A negative score indicates a company might cut its dividend, while a positive score notes the potential for an increase. A score must be above +50 to be conclusive about a potential dividend hike.
A high DDT score doesn't always mean a big dividend increase is coming, however.
For instance, a company might have a high DDT score but indicate it is about to execute a large share buyback, which would lower its projected dividend increase rate. That's why Bloomberg takes into account more than just the DDT score when making its projections.
We'll sort stocks in the S&P/TSX composite by the highest projected dividend growth rate by Bloomberg. We'll also only accept stocks with a current yield above 1 per cent.
WHAT DID WE FIND OUT? We do this screen every few months. BCE Inc. was near the top of the list in November, but has fallen off. It did recently increase its dividend. Canadian Oil Sands, Fairfax, Tim Hortons, Metro, Sherritt, Suncor, Home Capital, SNC-Lavalin, Enbridge, Rogers, Saputo, Groupe Aeroplan, Ritchie Bros, Astral and Canadian National are all still on the this list.
New to the list are Cenovus, Mullen, Barrick, Franco-Nevada, Laurentian and Shoppers Drug. No banks or insurance companies, traditionally the best place to find dividend growth in Canada until the past couple years, made the list.