TSI’s Scott Clayton has uncovered six impressive dividend-paying companies for your consideration. These firms’ proven dividend sustainability has earned top ratings. They’re prime takeover candidates too. As featured in our Globe and Mail exclusive, we applied our comprehensive 12-point Dividend Sustainability Rating System to spotlight the best acquisition target stocks.
These high-potential companies span diverse sectors from agriculture and utilities to food processing, cybersecurity, and pipeline operations. Whether it’s an Indianapolis-based agricultural innovator, an Oakville utility operator streamlining operations, or a Chicago food giant preparing for a strategic separation, each represents marketplace strength backed by sustainable dividend credentials and inherent takeover appeal.
Our screening process began with sustainable dividend-paying stocks, then focused on companies demonstrating key characteristics that attract acquisition interest: manageable market capitalizations, underperforming but high-quality assets, limited regulatory hurdles, and no major controlling shareholders standing guard.
The recent Teck Resources-Anglo American deal exemplifies how prime takeover candidates can emerge from companies with strong fundamentals but untapped potential.
And TSI’s Dividend Sustainability Rating System helps us uncover the next such target. We score dividend history (with bonus points for longer payment streaks and recent increases), management’s unwavering commitment to payouts, resilience during economic cycles, minimal foreign currency or political risks, robust balance sheets with manageable debt, sufficient cash flow coverage, and proven earnings power over multiple market cycles. We also award additional points for industry leadership positions that create competitive moats while maintaining acquisition attractiveness.
Excerpt from theglobeandmail.com, September 11, 2025
Sustainable dividends from stocks with the added benefit of takeover appeal.
The screen
This week’s announcement that Canadian copper miner Teck Resources Ltd. has agreed to be acquired by global giant Anglo American plc is bound to spur a hunt for the next big takeover deal. (It’s also likely to face a review by the Canadian government.)
As our analysts at The Successful Investor point out, prime takeover candidates typically share key characteristics – from low debt and hidden assets to affordable market caps, making for a manageable purchase by an interested buyer.
Target companies with top-quality, but underperforming, assets can also attract the same acquisition interest. Firms with no major shareholder standing guard or large regulatory hurdles that can thwart a takeover plan are no less attractive.
Ultimately, however, what company will win a takeover bid – let alone a firm offer – is largely a guessing game.
We think income investors are best to focus on sustainable dividends from quality businesses (with any chance for a takeover just adding to their appeal). We started there for this search, before homing in on companies well-positioned to receive takeover interest. From there, we applied our TSI Dividend Sustainability Rating System to evaluate those stocks. The system awards points based on these 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.
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6 takeover-ready sustainable dividend payers
Corteva Inc. (with a 1.0% yield), headquartered in Indianapolis, is a leading developer of new seeds and crop chemicals, including herbicides and insecticides, for the agriculture industry.
Oakville, Ontario-based Algonquin Power & Utilities (4.7%) has sold off assets to pay down its outsized debt and is now entirely focused on its regulated utilities, which supply electricity, gas, water distribution and wastewater collection services to customers in Canada, the U.S., Chile and Bermuda.
Idaho’s Lamb Weston Holdings (2.6%) is a leading producer of frozen french fries, potatoes and other packaged vegetables. Activist investors have spurred the company to conduct a strategic review of its operations. That could lead to a sale of the entire business.
South Bow Corp. (7.2%), headquartered in Calgary, was spun off from TC Energy Corp. in October 2024. It’s now a pure-play pipeline stock with about 90% of its cash flow coming from rate-regulated or long-term shipping contracts from oil producers.
Gen Digital Inc. (1.7%), based in Tempe, Arizona, is the parent company for several security-related brands, including Norton, LifeLock, and Avast, in addition to Avira, AVG, and CCleaner. Those strong brands could make it an attractive takeover candidate.
And finally, Chicago’s Kraft Heinz Co. (6.0%) has announced that it will split into two separate firms: one, temporarily called Global Taste Elevation, will focus on products like sauces, spreads, and shelf-stable meals. Its top brands are Heinz, Philadelphia and Kraft Mac & Cheese. The other, called North American Grocery, will focus on frozen meat and ready-to-eat brands for North America. Its main brands are Oscar Mayer, Kraft Singles, Lunchables and Maxwell House. One or both new companies could attract takeover interest. That’s what happened when the old Kellogg Co. split into Kellanova and WK Kellogg in 2023. In less than two years, both firms had agreed to takeovers.
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.
