The Globe and Mail attempts to identify equities trading at reasonable
valuations, paying attractive
dividends and generating the
excess cash necessary to reinvest
in their businesses in its Wednesday edition. The Globe's guest columnist Khaled Eniba writes in the Number Cruncher column that dividends are an important
component of total return that
cannot be ignored. Indeed, over
the past five years, dividends
have represented 43 per cent of
the S&P/TSX composite index's
total return.
Mr. Eniba says he screened for companies providing
a sustainable and consistent
income stream with the
potential to grow dividends,
while maintaining the versatility
needed to invest in their business
through production expansion,
new product development or
debt reduction. The price-to-earnings ratio had to be less than
the S&P/TSX, which has a P/E of
19. Dividend yield needed to be greater than 2
per cent. His picks needed to have positive predicted net income
growth over the next 12 months. He also wanted to see free-cash-flow yield greater
than dividend yield. Stocks matching his criteria are Toronto-Dominion Bank, Great-West Lifeco, Power Financial, Magna International and National Bank of Canada.
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