In our latest Globe and Mail column, we spotlight eight Alberta-based dividend payers across oil, pipelines, utilities and power generation.
Yet for income investors, a high yield is only part of the story. A generous payout can look appealing today and still be cut tomorrow if earnings, cash flow or the balance sheet can’t support it, a real risk in cyclical industries like energy.
The solution is to look past the yield and focus on dividend sustainability: Is the payout covered by earnings and cash flow? Is debt manageable? Does management make shareholder income a priority?
To find out, we put each company through our 12-point TSI Dividend Sustainability Rating System, which also weighs industry leadership, business cyclicality, and exposure to currency swings and political interference.
About 20% of S&P/TSX 60 companies are headquartered in Alberta, helping form the pillar of Canada’s Resources sector.
The Western province’s role in providing income for Canadian investors is also significant, spurred by a wealth of pipeline operators, electr\city generators, energy producers and more. Their importance directly adds to the dividend strength of financial sector giants clustered in Ontario and Quebec.
For this search, we started with a list of the biggest Canadian leaders headquartered in Alberta.
We then applied our TSI Dividend Sustainability Rating System to those offering shareholders income buoyed by strong cash flow and earnings growth.
Our system awards points to a stock based on key factors:
· Two points for five years of continuous dividend payments
· 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.
8 Alberta leaders in the dividend spotlight
Canadian oil and gas major Suncor Energy Inc. (with a 2.5% yield), headquartered in Calgary, generates production from oil sands, as well as conventional wells, for sale and to feed its refineries.
Pipeline operator TC Energy Corp. (4.2%), also based in Calgary, operates a 93,700-kilometre pipeline network that pumps natural gas from Alberta to eastern Canada and the U.S. It also owns gas pipelines in Mexico and holds, or invests in, seven power plants in Canada and the U.S.
Capital Power Corp. (4.5%), headquartered in Edmonton, is a major power producer in Canada and the U.S. Its portfolio includes natural gas, renewables, and battery energy storage solutions.
Enbridge Inc. (5.9%), based in Calgary, operates pipelines that pump oil and natural gas from Western Canada eastward as well as to the U.S.
Calgary-based Pembina Pipeline Corp. (4.7%) operates pipelines and more in Canada and the United States, while Keyera Corp. (4.4%), also based in Calgary, is one of our largest midstream oil and gas operators.
AltaGas Ltd. (2.6%), headquartered in Calgary, primarily processes, transports, stores and markets natural gas for producers. It also operates natural gas utilities and is a power generator, with gas-fired, coal-fired, wind, biomass and hydroelectric plants.
And finally, Calgary-based South Bow Corp. (6.0%) was spun off from TC Energy Corp. in October 2024. It’s now a pure-play pipeline company with about 90% of its cash flow coming from rate-regulated or long-term shipping contracts with oil producers. The company’s 4,900-kilometre pipeline network pumps crude from Alberta to refineries in Illinois, Oklahoma and the Gulf of Mexico.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
