Eoin Treacy's view Canada has a long history of dividend paying companies and its income trust sector continues to offer attractive yields, particularly when compared with what is on offer in government bonds. Changes to how income trusts are viewed for taxation purposes has led a number to change their designations to corporations but the country still hosts many companies paying impressive dividends.

Although the S&P/TSX Capped Income Index has lost members due to the trend of incorporation it continues to yield 7.73% which is impressive by any standard. In nominal terms, the Index has been ranging for much of the year, mostly above 120. It has sustained a progression of higher reaction lows since May but needs to hold a move above 133 to indicate a return to demand dominance. Unfortunately, I do not have a total return Index for this specific group, however following a search on Bloomberg I did find a total return index for the sector which I have now added to the Chart Library. This should give us a much more rounded idea of the sector's performance.

The Scotia Capital Canada Income Trust Total Return Index has rallied impressively from the March 2009 low and has been ranging below the 2008 peak since April. It broke upwards this week and a clear downward dynamic would be required to question potential for additional upside.

The S&P/TSX Dividend Aristocrats Index contains 56 companies that have increased their dividends for at least the last 5 years and includes common stock and income trusts. It is weighted by indicated annual dividend yield. Here is a section from the factsheet:

The index is weighted by indicated annual dividend yield. To prevent the index from being concentrated in only a few names, the methodology incorporates limits in index weights so that no individual stock represents more than 8% and no income trust represents more than 5%. In aggregate, income trusts are capped at 30% of the index weight.

The S&P/TSX Dividend Aristocrats Index doesn't have very much back history but has outperformed the S&P/TSX Composite since at least mid 2008. In nominal terms, it remains in a relatively consistent uptrend, with a progression of higher reaction lows and while it lost momentum somewhat this year, it broke upwards last week and a downward dynamic would be required to check potential for further upside. The Total Return Index has a relatively similar pattern but broke upwards at the beginning of September.

The Index contains 56 members and while indices for the USA and Europe analysed earlier this week showed a trend towards consumer related shares, the Canadian Index remains dominated by Financials, Utilities and Energy companies which reflects the Canadian economy's strengths in natural resources and a relatively sound banking system. The results of a High / Low Filter for this group of 56 shares and trusts has 21 making at least new 3-month highs with two making new all time highs.

While subscribers will be familiar with our views on Cameco, and Saputo has appeared in reviews of food companies, (Also see Comment of Day on August 10th). I was particularly impressed by two of Canada's larger banks. Bank of Nova Scotia consolidated mostly above the 2007 peak for much of this year but broke upwards three weeks ago and a downward dynamic would be required to check momentum beyond a brief pause. Toronto Dominion has also been consolidating above the 2007 peak and is testing the upper side of the range. A sustained move below C$70 would be required to question potential for a successful upward break.

I had intended to also conduct a similar analysis for the S&P Pan Asia Dividend Aristocrats but was unable to access the constituents of the Index. However, a review of Asian high yielding shares posted in Comment of the Day on August 19th may be of interest.