What are we looking for?
Canadian stocks that balance sustainable income with fundamental strength, focusing on companies demonstrating consistent profitability. By focusing on financially sound firms, the screen aims to identify Canadian stocks capable of weathering both economic headwinds and sector-specific shocks. This strategy prioritizes resilience.
The screen
We employed Trading Central Strategy Builder to screen Canadian-listed equities meeting four key criteria: a minimum 10-per-cent return-on-equity to identify companies with strong profit-generation capabilities, a TC Quantamental Quality factor rating of at least 55/100 (evaluating profitability, balance sheet strength and earnings sustainability), a dividend yield above 2 per cent to prioritize income stability and a debt-to-equity ratio below 1 to target firms with conservative leverage.
This dual focus on fundamental health and quantitative metrics aims to uncover companies that deliver shareholder returns without compromising financial prudence.
To contextualize results, we incorporated additional metrics such as price-to-earnings ratios for valuation clarity, dividend yields for income assessment, and year-to-date and one-year price performance to gauge momentum trends.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener is available through leading retail brokers in Canada and worldwide.
What we found
Topping our list is Canadian metals and mining company Lundin Gold Inc. LUG-T The stock boasts a remarkably high TC Quality Factor Rating of 89, reflecting robust financial health and efficient operations. Its year-to-date performance of 78.3 per cent signals strong investor confidence and market momentum. With a return-on-equity of 39.23 per cent and a dividend yield of 3.01 per cent, Lundin Gold balances profitability with shareholder returns.
Manulife Financial Corp., MFC-T the largest company by market capitalization among our screened names at $68.15-billion, is a global insurance and financial services leader that stands out for its strong fundamentals and attractive income profile. The company reported a return-on-equity of 11.87 per cent, paired with a conservative debt-to-equity ratio of 0.32, reflecting solid financial discipline. Its 4.44-per-cent dividend yield and P/E ratio of 13.96 add to its appeal as a stable, value-oriented pick. While the stock is down 9.7 per cent year-to-date, it has gained 26.1 per cent over the past year, suggesting the current weakness could represent an entry point for long-term investors focused on income and stability.
Secure Waste Infrastructure Corp., SES-T a leading Canadian waste management company, ranks among the top names on our list owing to its exceptional profitability metrics. The company reported an impressive return-on-equity of 52.24 per cent, the highest on our list, reflecting strong earnings efficiency and capital management. With a debt-to-equity ratio of 0.44, the balance sheet remains reasonably leveraged to support growth initiatives. Despite these strong fundamentals, the stock has declined 20.6 per cent year-to-date, although it remains up 14.4 per cent over the past 12 months, suggesting recent weakness may be sentiment-driven. Its dividend yield of 3.11 per cent and P/E ratio of 5.72 also point to compelling value for investors seeking exposure to the industrial and environmental services sector.
Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 17-per-cent annualized return compared with 10 per cent for the S&P/TSX Composite Index.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is the director of North American research at Trading Central in Ottawa.
