Canadian All-Star Stocks: Dividend Increases – Week Of April 6

The pressure is being felt. As COVID-19 mitigation efforts wreack havoc on the global economy, investors’ dividend growth portfolios are being tested. On both sides of the borders, dividend growth companies are being tested like never before.

Although no All-Stars are scheduled to announce an increase this coming week, there is plenty to recap from last week. Unfortunately, none of it is good news for dividend growth investors.

Of note, all figures are in Canadian dollars unless otherwise noted.

Recent dividend updates

Disappointing. That is probably the best word to describe last week. Dollarama (OTC:DLMAF)[TSX:DOL] was the only All-Star on tap to raise dividends and unfortunately, the dividend was kept steady.

Likewise, two other All-Stars – A&W Royalties Income Fund (OTC:AWRRF)[TSX:A&W.UN] and Inter Pipeline (OTCPK:IPPLF)[TSX:IPL] – both announced a cut to their dividend.

	EST DGR	EST Increase	ACTUAL DGR	ACTUAL Increase	NEW DIV
A&W Royalties	N/A	N/A	-100%	-0.159	$0.00
Inter Pipeline	N/A	N/A	-71.93%	-0.1025	$0.04

The lack of a raise dividend raise announcement by Dollarama was certainly disappointing. The company has a low payout ratio and has benefited from the recent COVID-19 panic buying.

In its release, Dollarama pointed out that after an initial uptick in volume, the latter part of the month saw slowing traffic. This is not surprising as COVID-19 mitigation efforts took effect and became more pronounced.

Considering this, it is not all that surprising that the company took a cautious approach to the dividend. It still has a few more quarters in which to raise and maintain its All Star status. This is likely to be in the second half of the year.

Now onto the dividend cuts.

Inter Pipeline slashed the dividend by 72% as it struggles with low oil prices and high capital expenditures. The company’s dividend was already on the brink before the recent bear market.

It had little room for error as it is undertaking the largest project in company history – the $3.8 billion Heartland Petrochemical plant. The cut provides it with ample breathing room as it works to complete the project on time and on budget.

Likewise, Inter Pipeline also suspended the company sponsored dividend reinvestment plan [DRIP]. At current prices, the DRIP was leading to significant share dilution. Some analysts’ had the dilution pegged at almost 10%.

The move effectively ends Inter Pipeline’s 11-year dividend growth streak.

For its part, A&W Royalties announced a temporary suspension to the dividend. The Canadian quick service restaurant industry has been significantly impacted by COVID-19. The suspension was made in an effort to preserve capital during these difficult times.

Where this move differs, is that the dividend is likely to be re-instated once COVID-19 mitigation efforts subside.

Upcoming Dividend Raises

It is expected to be a quiet couple of weeks. There are no All-Stars on tap to raise dividends.

Unfortunately, the pace of dividend cuts is ramping up. As mentioned last week, I am keeping track of all TSX-listed dividend cuts on this page. Thus far, there have already been 28 cuts over the past month, three of which are All-Stars. Almost daily, there are new companies added to the list.

As COVID-19 and the war on the price of oil continue to weigh, there are likely to be several more dividend cuts over the next few months. As we progress, I’ll be sure to keep investors updated.

Likewise, there is a high likelihood that companies will either keep the dividend steady or announce temporary dividend suspensions. Given this, it is important for dividend growth investors to keep their expectations in check.

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Disclosure: I am/we are long IPPLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.