What are we looking for?
Sustainable dividends from stocks spurred by recent C-level changes.
The screen
Shares of Canadian Imperial Bank of Commerce (CM-T) continued their rise this week as the bank announced a number of C-suite changes.
These come as CIBC veteran Harry Culham is set to succeed Victor Dodig as its president and chief executive on November 1.
The changes are just some of several C-level moves, across various industries, that have lifted investor expectations and spurred share prices.
Our analysts at The Successful Investor point out that CEO announcements often bolster goodwill in the short term. But only the best of them spur long-term gains while deepening dividend sustainability.
We started this search with an extensive list of dividend-paying stocks, before singling out those with recent top executive changes that have attracted positive market reaction. We then applied our Dividend Sustainability rating system, which 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.
Toronto-based CIBC – now with an heir for Mr. Dodig – is Canada’s fifth-largest bank by market capitalization.
Harley-Davidson Inc. HOG-N, headquartered in Milwaukee, Wisc., is a maker of heavyweight custom and touring motorcycles and related products. On Aug. 4, it appointed Artie Starrs as its new chief executive.
Connecticut-based Stanley Black & Decker Inc. SWK-N is one of the world’s largest makers of hand and power tools. In addition to brands Stanley and Black & Decker, it offers top-selling brands DeWalt, Lenox, Irwin and Craftsman. Christopher Nelson will take over as CEO on Oct. 1.
Yum! Brands Inc. YUM-N, headquartered in Louisville, Ky., operates over 61,000 restaurants in more than 155 countries. Its main banners are KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Incoming CEO Chris Turner assumes the post on Oct. 1.
Winnipeg-based Great-West Lifeco Inc. GWO-T is a top life insurer in Canada and the United States, as well as in Britain and Europe. Effective July 1, David Harney became the company’s new CEO. He succeeds Paul Mahon, who was CEO for 12 years.
And finally, another leading Canadian insurer, Manulife Financial Corp. MFC-T, headquartered in Toronto, gained a new leader on May 1 when Phil Witherington became CEO.
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.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.