What are we looking for?
Companies distributing a large portion of their earnings as dividends
The are many reasons why investors could be looking for dividends. From a capital allocation point of view, dividends protect investors from poor management decisions, such as prioritizing growth at any cost or engaging in buybacks at unattractive valuations. Both actions destroy shareholder value over the long term.
From a tax perspective, compared with buybacks, eligible dividends distributed by public companies are more tax-efficient for lower tax brackets than capital gains, making dividend-payers potentially a sensible decision for some individuals with liquidity needs, like retirees.
Investors are encouraged to consult a tax specialist to understand how different types of income may affect their tax obligations and social benefits.
The screen
We screened for Canadian companies with a market capitalization greater than $1-billion with:
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