There are generally two types of income stocks. Those with a high yield and those with a long and storied history of dividend growth. To be considered a dividend-growth company, a dividend-growth streak of five or more years is generally required.
On Friday, the company with the seventh-longest dividend-growth streak in Canada, Imperial Oil (TSX:IMO)(NYSE:IMO), released first-quarter results. The company was expected to raise dividends. Did the company deliver? Let’s take a look.
Earnings at a glance
Let’s start with the company’s first-quarter performance. It wasn’t a great quarter, and we are starting to see the impact of Alberta’s production cuts on integrated oil companies. Earnings of $0.38 missed by $0.08 and dropped almost 40% year over year. Alberta’s policy impacted the economics of crude by rail. As such, the company ceased moving oil by rail in February after increasing it to record levels in 2018.
Although the company has since resumed moving oil by rail in a limited capacity, it once again warned against the economics.
On the bright side, cash flow from operations also increased by 180 basis points over the first quarter of 2019. In total, the company generated over a billion in cash flow. This is a positive sign that supports the company’s strategy of returning cash to shareholders.
Along with earnings, Imperial Oil also announced its annual dividend increase. The company raised dividends by $0.03, or 15.79%, for a new quarterly rate of $0.22 per share. It marks the 25th consecutive year of dividend growth for the company.
To put the importance of this into perspective, only five other TSX-listed companies currently have a +25-year growth streak. A 25-year dividend-growth streak is also the widely accepted milestone to officially mark a Dividend Champion.
There is no doubt that Imperial Oil is one of Canada’s premier dividend-growth companies. The company yields just over 2% and its historical dividend-growth rate has been on the rise. Not including today’s raise, its three-year dividend-growth rate hovered around 11%.
With a payout ratio in the mid-20s, there is no reason Imperial Oil cannot reward investors with continue double-digit growth in the near future.
Imperial Oil is one of Canada’s largest integrated oil companies. This enables it to outperform the industry when the price of oil is in a bear market. Conversely, when the price of oil enjoys a bull run, the company stands to benefit in a big way.
As one of Canada’s top dividend stocks, Imperial Oil is a great choice for growth and income investors.
- Make $500 of Passive Income a Month With These 2 REITs
- Why Every Investor Needs to Start Building a Passive-Income Empire Today
- 2 Different Ways to Generate $1,000/Month of Passive Income in Your TFSA
- Shopify Inc (TSX:SHOP) Faces its Biggest Challenge Yet: Facebook (NASDAQ:FB)
- Top stocks for 2019
- Two New Stock Picks Every Month!
Fool contributor Mat Litalien has no position in any of the stocks mentioned.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019