Three Solid Canadian Dividend Stocks to Buy (Following Up Earlier Advice)

We update you on each of our Recommended Common Stocks on a rotating basis approximately every three months, as well as in between those regular updates where events warrant. The following four growth and income stocks are now due for their quarterly updates.

In those three months, the S&P/TSX Composite Index has risen by 5.49% (last update on these stocks it was up 5.84%). As another reference point, the TSX Composite Index is up 5.90% from one year ago (last update it was up 3.30%).

Three of the four following dividend stocks show a gain in the past three months, one more than the TSX; MBT is down by 7.5%. On a one-year basis, three are up in price from a year ago, all of them by way more than the TSX. Again MBT is the exception.

BMO earnings increase modestly in 2013

Bank of Montreal (TSX:BMO) Recent price $71.04; dividend $3.04; yield 4.28%; EPS $6.27; PE 11.3; 52-week high $74.69; 52-week low $58.68; one-year price change +15.7%

BMO did modestly well in its fiscal fourth quarter of 2013: earnings rose 2% to $1.62 per share from $1.59 per share last year in the same quarter. In all of fiscal 2013, earnings were up 2% to $6.26 from $6.15 per share. Only the third quarter was good for the bank this year, where earnings rose 18%.

Three updates ago BMO raised its dividend payout to $2.96 from $2.88 per share annually. Two updates before that the bank announced an increase to $2.88 per share from $2.80. This update the company has raised its payout again, to $3.04 per share annually from $2.96.

Driven by the recent earnings and dividends, the stock price is up 3.56% in three months, the second increase in a row. It is also up 15.7% in a year, yet it still trades at a modest PE ratio of 11.3 times.

Our advice on BMO is a buy-and-hold, for this high dividend stock.

CNR posts six increases in six updates

Canadian National Railway Company (TSX:CNR) Recent price $60.08; dividend $0.86; yield 1.43%; EPS $3.05; PE 19.7; 52-week high $62.20; 52-week low $45.01; one-year price change +32.6%

Canadian National has a number of things in its favor. For one, it is North America’s most efficient Class 1 railroad. For another, it’s the only North American railroad to serve all three coasts: Atlantic, Pacific and Gulf. Third, it is one of the top large cap dividend stocks on the TSX – the fifth largest to be precise, after three banks and Suncor. Such factors give it great economic clout, both in raising money in the capital markets and in competing for customers.

Since last update CNR has split its stock two for one, so its dividend is unchanged at $0.86 per share annually. In fiscal 2012 the company boosted its earnings by 13% to $6.12 per share. In the third quarter of 2013, earnings rose by 10% to $1.67 per share from $1.52, after also increasing 3% in the first quarter and 11% in the second quarter.

In the past three months the stock price is up 15.79%, adding to increases in the previous five updates. It’s also up 32.6% in a year. CNR is a buy.

No deal on MBT selling itself

Manitoba Telecom Services Inc. (TSX:MBT) Recent price $29.89; dividend $1.70; yield 5.69; EPS $0.01; PE 2989.0; 52-week high $36.60; 52-week low $28.18; one-year price change -7.5%

With MBT wanting to ditch its business division Allstream, it put the division up for sale, but there were no legitimate takers. In fiscal 2012 this incumbent telecom reported earnings of $2.63 per share, up 3% from 2011. In the third quarter of 2013, earnings were down 24% to $0.38 from $0.50 per share.

The stock is down 9.42% in three months and down 7.5% in a year. Our investment committee is examining MBT but for now it remains a buy.

PJC earnings way up in second quarter

Jean Coutu Group Inc. (TSX:PJC.A) Recent price $18.45; dividend $0.34; yield 1.84%; EPS $2.01; PE 9.2; 52-week high $19.60; 52-week low $14.13; one-year price change +27.2%

Jean Coutu Group operates a network of 400 franchised stores in Quebec, New Brunswick and Ontario, and employs close to 19,000 people. It also owns Pro Doc Ltd., a Quebec-based manufacturer of generic drugs, and still has a big stake in Rite Aid.

PJC now pays a dividend of $0.34 per share, up from $0.28 three updates ago, and it also paid a $0.50 special dividend after the recent issuer bid. Its price is up 0.87% in three months for the fifth gain in five updates. In the second quarter of fiscal 2014 (PJC has a different year end than most) earnings were up 330% to $0.99 from $0.23 per share.

PJC is a buy for further gains and modest income.


Money Reporter, MPL Communications Inc.
133 Richmond St.W., Toronto, ON, M5H 3M8. 1-800-804-8846

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