Beating the TSX in 2012: Sun Life Out and Rogers In?

Back in August 2011 I adopted a modified Beating the TSX method for selecting my stocks. Out of curiosity I decided to take a look at which stocks might make up the BTSX portfolio if I was just starting today. Here is the analysis.

  • Begin with the TSX60 stocks.
  • Remove any stocks with a dividend of less than 3%. This minimizes the number of stocks I need to analyze.
  • Remove any stocks that might have an unsustainable dividend. For this I remove any stock with a payout ratio above 1.2 (equivalent to a coverage of less than 83%). I also remove any former trusts.
  • Finally, select the ten stocks with the highest dividends.

The analysis looks like this:

Screen Shot 2013-02-13 at 10.20.08 AM
So, according to my analysis the stocks would be:
  • BCE Inc.
  • Bank of Montreal
  • Canadian Imperial Bank Of Commerce
  • Husky Energy Inc.
  • Power Corporation of Canada
  • Rogers Communications Inc.
  • Shaw Communications Inc.
  • TELUS Corporation
  • TransAlta Corporation
  • TransCanada Corporation

There is only one change since 2011: Sun Life is out and Rogers is in. Sun Life had no earnings in 2011 after surprise losses in European investments, so its dividend coverage is now unacceptable. It pays a great dividend of 6.22% but could be a value trap. Analysts estimates are strong for 2012 onward, suggesting that losses are now behind us. Additionally, I already own Telus and BCE, so adding Rogers might make my portfolio too Telco-heavy. I will hold Sun Life.


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