Stock Market Series

Are All Canadian High-Yield Dividend Stocks Investable (Part 1)?

I am always looking for investments that has high returns.

Recently, I found this list of Top 100 Dividend Stocks in 2018 on MoneySense, a Canadian online personal finance and lifestyle magazine, and wonder if they are all investable long-term.

I am not going to even look at the low-yield dividend stocks because they just waste my time.

Instead, I look at stocks that have dividend yields higher or equal to 5.0% because I want to generate high returns.  There are nine dividend stocks that fit the category:

Screen Shot 2017-10-10 at 4.29.40 PM

Let’s start from the top:

Altagas (TSE:ALA)

AltaGas is a Canada-based diversified energy infrastructure business with a focus on owning and operating assets to provide clean and affordable energy to its customers.   The company’s main business is natural gas gathering, processing and storage.  In addition, Altagas delivers natural gas to home and businesses all around North America.

Screen Shot 2017-10-10 at 4.52.26 PM

Just by looking at the P/E ratio, I would not invest in Altagas because it is too high.  P/E ratio measures a company’s current share price relative to its per-share earnings.  A company with a high ratio is risky because it is trading at a very high price while its earning is very low.  In fact, Altagas’s stock price is on a descending trend and it would probably keep on decreasing because Altagas is just WAY TOO OVERPRICED.

Inter Pipeline (TSE:IPL)

Inter Pipeline is a major petroleum transportation, storage and natural gas liquids processing business based in Calgary, Alberta, Canada.  The company owns and operate four business segments, which include oil sands transportation business, conventional oil pipelines business, natural gas liquids (NGL) processing business and bulk liquid storage business, in western Canada and Europe.

Screen Shot 2017-10-10 at 5.14.08 PM

I think I would invest in Inter Pipeline just by looking at the P/E ratio because it is still reasonable.  For me, a company with P/E ratio of 20 is investable as long as the company is performing well fundamentally.

Let’s do an financial statement analysis of Inter Pipeline (click here if you forget all the accounting formulas):

Screen Shot 2017-10-10 at 8.59.01 PM

Unfortunately, I do not think I would invest in Inter Pipeline because of the high debt to shareholders’ equity ratio and the sudden drop in retained earnings from 2015 to 2016.   Having a high debt to shareholders’ equity ratio means Inter Pipeline very likely is using debt or equity to finance its operation.

In the next post, we will continue to look at the other seven dividend stocks and see whether they have durable competitive advantage.

Please leave any comments! Catch you on the flip side!

14 thoughts on “Are All Canadian High-Yield Dividend Stocks Investable (Part 1)?”

      1. What country are you from? I am from Canada and here we have resources like MoneySense.ca (a online Canadian financial magazine) and morningstar.ca that I can do my research. Once I have spotted a stock I am interested in, I would look at the P/E ratio because that way I know if the company is overvalued or undervalue. If it is undervalue or in the right value, I would then read the financial statements and see if the company is fundamentally healthy.
        If you are from the States, Finviz.com would be a great source because it is a stock screener that allow you to choose stock based on what your criteria is in a potential investable stock. Read this post I wrote and see how I screen potential stocks on Finviz: https://myjourneytosixmillion.wordpress.com/2017/09/05/finviz-where-potential-stocks-could-be-found/
        I think a quality of a good stock is in the right value, has positive cash flow, has no or very little debt and has increase in revenue on a yearly basis. You do not want to invest in a company that is going downhill. Hope this help! Feel free to reply me back.

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