TSI’s Scott Clayton has identified five stocks excelling in dividend sustainability and growth potential.
Our 12-point rating system filters for cash flow coverage exceeding dividend obligations, insider ownership and minimum five-year dividend growth histories among a number of factors—criteria that screen out the majority of dividend payers.
The final five picks include a Canadian telecom, a miner supplying materials critical to digital infrastructure development, an engineering and consulting services leader, Brazil’s largest sanitation company, and a major Japanese beverage firm. Each demonstrates robust cash flow generation, multi-year dividend track records, and institutional investor confidence evidenced by recent position increases by the CPP.
These companies share strategic advantages: essential service models with recurring revenues, high regulatory barriers to entry, debt profiles below sector averages, and executive teams incentivized to prioritize shareholder returns. Their selection also reflects alignment with the Canada Pension Plan Investment Board’s approach to balancing income needs with capital preservation, achieving a recent 9.3% return amid recent volatility.
Excerpt from theglobeandmail.com.
What are we looking for?
Dependable dividend payers used by the Canada Pension Plan Investment Board to bolster its 2025 holdings – and to achieve an impressive 9.3 per cent return.
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The screen
Specifically, the country’s largest pension fund reported that return for the fiscal year ended March 31, 2025. The growth resulted in overall assets of $714.4 billion by the end of the period – despite recent market volatility.
While many retail investors would like to track the CPP’s holdings, and its returns, that’s a daunting task: publicly traded shares are just one component of the fund’s total assets, which also include private equities, credit investment, real estate, etc.
Nonetheless, the Successful Investor’s team of analysts see real value in reviewing the CPP’s dividend-paying holdings and evaluating the sustainability of their dividend payouts.
For this particular search, we started with the fund’s list of dividend payers. We then narrowed that list to those stocks recently acquired by CPP Investments as well as those it recently upped its stake in. From there, we looked at revenue, earnings and growth prospects before applying our TSI Dividend Sustainability Rating System; it 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.
5 dividend stocks offer defensive income reliability
Our TSI Dividend Sustainability Rating System generated five stocks.
Montreal-based Quebecor Inc. (with a 3.7% yield) is a diversified media and telecommunications company based in Montreal. It’s one of three new stock holdings for fiscal 2025 that CPP highlights in its latest report.
Another is Teck Resources Ltd. (1.0%). Headquartered in Vancouver, Teck operates copper and zinc mines.
The third is Sabesp (2.7%), Brazil’s largest sanitation company (serving Sao Paulo state) and one of the world’s largest.
Meantime, CPP upped its stake in Montreal-headquartered WSP Global Inc. (0.5%), which provides engineering and consulting services. That stock was already the fund’s largest Canadian publicly traded shareholding.
Japan’s Asahi Group Holdings Ltd. (2.5%), a beverage company, is another stock holding the fund added to for the most-recent fiscal year.
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.
