Earnings season kicked into high gear over the past few weeks, and we’ve now seen the results for most of our Dividend Champions. Between monthly issues, we provide weekly comments on each company’s earnings after they’re announced. Below, we summarize the highlights for the group of companies that have reported results since early February.

A&W Revenue Royalties Income Fund (TSX: AW-U, OTC: AWRRF), a recent addition to the Dividend Champions Portfolio, reported decent fourth-quarter results.

Royalty income (which is equivalent to revenue) increased by 1.0% year over year, as both same-store sales and the number of stores contributing to the royalty pool increased. The slower growth in the quarter can be ascribed to fewer trading days compared to the year-ago period.

The monthly distribution per unit is 7.3% higher than a year ago. The board’s objective is to dispense all distributable cash flow. Accordingly, the payout ratio for the quarter was 99%.

Although growth slowed somewhat compared to the strong momentum during the first nine months of the year, the business is still increasing its share of a very competitive fast food market. The “better burger” initiative, which focuses on providing healthier and higher-quality ingredients, is resonating well with customers.

The unit price has increased by more than 20% since we added the stock to the Dividend Champions Portfolio in October. Admittedly, we are somewhat uncomfortable with the stock’s rapid appreciation when the underlying company is essentially a slow-growth business in a mature market.

A&W’s units currently yield 3.9%, with the prospect of further dividend growth of 2% to 3% annually. We estimate A&W’s fair value at C$37, or US$28, but would not chase the units given the run-up in the share price.

Cineplex Inc. (TSX: CGX, OTC: CPXGF) delivered poor results for the fourth quarter, with adjusted earnings per share down 42% year over year.

However, the company’s performance can be somewhat volatile from quarter to quarter since it’s largely dependent on the popularity of film releases during each period. As such, it’s more instructive to compare full-year 2016 results against the prior year.

For the full year, revenue increased 8%, thanks in part to the acquisition of a controlling interest in arcade game distributor and operator CSI.

Box-office revenue was up 1%, food-service sales climbed 1.3%, and advertising jumped 11%. Operating expenses were well contained, though that was not enough to prevent a 6% decline in adjusted EBITDA (earnings before interest, taxation, depreciation, and amortization). 

Box-office revenue and concession revenue per patron both hit record highs during the year, as the company provided more premium theater experiences and offered higher-margin food choices.

However, attendance was down 12% compared to 2015, when “Star Wars: The Force Awakens” and several other highly popular movies drove attendance to record levels.  

The balance sheet remains solid, with a debt-to-capital ratio of 26%, while operating and free cash flow are abundant.

Cineplex currently yields 3.2%, and the monthly dividend is 3.9% higher than a year ago. But the payout ratio is only 65% of free cash flow, which leaves further room for dividend growth.

At the same time, the company’s shares trade at full value when compared to similar North American operators. We estimate Cineplex’s fair value at C$54, or US$40.

CI Financial Corp. (TSX: CIX, OTC: CIFAF), the mid-size Canadian asset management company, produced reasonable results for the fourth quarter, with earnings per share up 6% from a year ago. The dividend was also 6% higher.

The company experienced its fourth consecutive net quarterly outflow of assets under management, as institutional investors made large redemptions. Profit margins were also squeezed as the trend toward lower management fees for actively managed accounts continued.

The company’s balance sheet remains strong, and cash flow is abundant. Free cash flow is currently fully utilized to pay dividends and buy back shares.

Times are tough for mutual fund managers. Only those that can outperform both the market and low-cost ETFs will survive in the long run. CI Financial is a high-quality operation, but margin pressure will continue as the firm’s portfolio managers work to further improve their performance.

Meanwhile, the company’s valuation is in line with its peers. CI’s shares currently yield 5.1%, and we estimate the stock’s fair value at C$29, or US$22.

There’s light at the end of the tunnel for Finning International Inc. (TSX: FTT, OTC: FINGF), as the company saw fourth-quarter adjusted earnings per share improve by 20% year over year. The dividend remained unchanged.

Finning has been working hard to align its cost base to the weaker operating environment and succeeded in lowering operating costs by 7% during the year.  

While fourth-quarter revenue fell slightly from a year ago, the magnitude of declines has been decreasing, with better prospects for 2017.

The company’s balance sheet remains in good shape, with a debt-to-capital ratio of 32% and investment-grade credit ratings from DBRS and S&P.

Our outlook for the company remains somewhat subdued since mining and energy companies are not rushing to increase capital spending, even with improving commodity prices. However, we have seen the worst of this cycle and expect much better results in 2017, albeit from a low base.

The strong balance sheet and reasonable cash flow should ensure a stable dividend, though the next dividend increase probably won’t happen until 2018.

The market is already discounting a full recovery for Finning and the stock has moved up strongly from its early-2016 lows. Shares of Finning currently yield 2.9%, and we estimate the stock’s fair value at C$26, or US$19.

Canadian utility giant Fortis Inc. (TSX: FTS, NYSE: FTS) reported strong fourth-quarter results, with adjusted earnings per share up 25% from a year ago, while the dividend was 7% higher.

Operating results from the various divisions were generally sound. Profits from regulated utilities in Canada grew 13%, while U.S. and Caribbean utilities (excluding the recently acquired ITC) increased profits by 14%.

A key focus for Fortis during 2016 was the completion of the US$11.3 billion acquisition of ITC, the U.S. Midwest transmission business. ITC made a robust contribution of C$81 million to profits during the year’s final quarter, and management expects the transaction to make a positive contribution to earnings per share in 2017.

The company’s balance sheet remains in good condition, with a debt-to-capital ratio of 57%.

In early March, Fortis issued C$500 million worth of new shares. This action will help reduce the debt ratio, while also placating Standard & Poor’s, which had shifted to a negative outlook on Fortis’ “A-” credit rating after the ITC deal was announced. The credit rater later lifted its outlook back to “stable.”

The secondary issuance will increase shares outstanding by 3%, which will dilute profits. Thankfully, the company says it does not need to issue any more shares over the next five years to fund its capital program.

Fortis intends to grow its dividend 6% annually for the foreseeable future, and that is supported, in our view, by strong cash flow and reasonable leverage. Shares of Fortis currently yield 3.7%, and we estimate the stock’s fair value at C$46, or US$34.

Inter Pipeline Ltd. (TSX: IPL, OTC: IPPLF) reported credible fourth-quarter results, with funds from operations per unit (FFO—an estimate of cash flow) up 13% from a year ago. The dividend per share was 4% higher.

The business performed well at the operating level, with the star performance coming from natural gas liquids (NGL) processing, where higher volumes, better margins, and the inclusion of the Williams Canada NGL business resulted in a 160% increase in profits.

The European bulk liquid storage facilities operated at almost full capacity and delivered a 3% increase in profits.

Oil sands pipelines, which comprise the largest division, produced slightly higher profits after the acquisition of an additional working interest in the Cold Lake pipeline during the quarter.

Debt levels increased during the year in part to finance the Williams and Cold Lake acquisitions, as well as to fund some modest capital expenditures. The debt-to-capital ratio is somewhat elevated, at 57%, though the company still enjoys an investment-grade credit rating from the main agencies.

Capital expenditures continue to drop as the multi-year expansion program comes to an end. However, Inter Pipeline is considering the development of propylene and polypropylene production facilities at an estimated cost of over $3 billion. A final investment decision is expected by mid-2017, with an expected in-service date in 2021.

With a growing dividend and a current yield of 5.6%, Inter Pipeline’s shares remain attractive even though the stock is nearing our estimated fair value of C$31, or US$23.

RioCan REIT (TSX: REI-U, OTC: RIOCF) reported fourth-quarter adjusted funds from operations per unit declined 8.5% year over year. The distribution per unit was unchanged.

Despite an improvement in Canadian operations, RioCan’s sale of its sizable U.S. portfolio last year left a gap in overall profits.

Operationally, RioCan had a good quarter, with same-property operating income up 2.2% along with an 8.1% lift from renewals.

Committed occupancy improved during the quarter to 95.6%, but it’s still lower than the 97% achieved before the departure of Target Canada in early 2015. Management reports that it has signed or received commitments from new tenants that will cover 120% of the lost Target rent base. However, the majority of new tenants won’t start to pay rent until after rent-free periods terminate over the next 12 months.

In addition to working toward reinvesting most of the US$1.0 billion in proceeds from the sale of the U.S. portfolio, RioCan has also used the money to reduce debt. The balance sheet is now in excellent shape, with a debt-to-asset ratio of 40%. 

RioCan currently has an attractive distribution yield of 5.5%, but we remain concerned about the lack of distribution growth. The payout ratio remains over 90%, and we believe it’s unlikely that RioCan’s board will push the ratio much higher. Growth in distributions will depend on growth in profits.

The REIT owns a high-quality portfolio concentrated in the core urban areas of Canada. The re-leasing of the Target space and development and intensification of existing properties will boost profits over the next few years. For now, we will continue to hold RioCan in the Dividend Champions Portfolio.

Suncor Energy Inc.’s (TSX: SU, NYSE: SU) recovery gained momentum during the fourth quarter as the company bounced back from weak energy prices and the Fort McMurray wildfires.

Cash flow from operations per share jumped 58% year over year, as both production volumes and energy prices improved. The dividend per share was increased by 10.3% compared to last year.

Crude production reached a new quarterly record of 739,000 barrels of oil equivalent per day, mainly as a result of the increased working interest acquired during the year in the Syncrude operation, as well as the better production efficiencies achieved there.

Management continues to maintain tight control over costs, with oil sands cash operating costs declining 11% year over year, to $25 per barrel. Syncrude operating costs were also 19% lower than a year ago.

The balance sheet remains in sound condition, with a debt-to-capital ratio of 28% despite a $3.2 billion increase in debt during the year. Cash flow improved significantly during the second half of 2016, as volumes and product prices recovered.  

We are holding Suncor in the Dividend Champions Portfolio for its ability to sustain its dividend during commodity down cycles and boost its dividend during up cycles. So far the company has not disappointed, and we were pleasantly surprised by the recent dividend increase. However, prospects for further dividend growth are largely dependent on energy prices.

Shares of Suncor currently yield 2.9%, and we estimate the stock’s fair value at C$43, or US$32.

Telus Corp. (TSX: T, NYSE: TU) announced disappointing results for the fourth quarter, with adjusted earnings per share down 1.9% from a year ago. Meanwhile, the dividend was increased by 9.1%.

Sales rose 2.7% as both the wireless and wireline divisions generated higher revenue, while adjusted EBITDA (earnings before interest, taxation, depreciation, and amortization) climbed 3.7%. However, we note a large one-time compensation item that was excluded from adjusted EBITDA.

The wireless division grew adjusted EBITDA by 4.0%, as subscribers increased by 1.5% compared to last year and also paid more on average for the use of their devices. Critically important, the average revenue per user was up 3.9%, while the number of more profitable post-paid users was also higher.

The secular trends in the wireline division continued, with landline connections declining while TV and Internet connections increased by 5.4% and 5.7%, respectively. EBITDA in this division grew 1.7%.

The balance sheet remains somewhat stretched, with another $700 million in net debt piled on during the year, bringing total net debt to C$12.7 billion. The debt-to-capital ratio is an elevated 62%, but Telus intends to pare debt as the benefits from its spectrum acquisitions and infrastructure buildout come to fruition.

Telus continues with its fairly aggressive dividend program by targeting growth in the payout of 7% to 10% annually. We note that free cash flow fell short of covering the dividend during 2016, which means the company is effectively borrowing to finance its payout. Consequently, we suspect that dividend growth may have to be reined in soon, or that the share-repurchase program could be discontinued.

Management forecasts sales growth of 3% for full-year 2017, along with a rise in EBITDA of 4.5%. Earnings per share are expected to increase 5%, while dividend growth of 7% to 10% is being targeted.

With an enterprise value to EBITDA ratio of 7.7 times, the telecom giant’s valuation remains attractive in absolute terms despite the slowdown in earnings growth. Shares of Telus yield 4.4% on a forward basis, and we estimate the stock’s fair value at C$51, or US$38.

Toronto-Dominion Bank (TSX: TD, NYSE: TD) reported very good results for the first quarter of its 2017 financial year, with adjusted earnings per share increasing by 13% year over year. The dividend per share was increased by 9%.

Overall, the bank performed well, with higher net interest income and trading profits, while provisions for credit losses saw a slight decrease.

Canada Retail banking, the main contributor to profits, reported slightly higher net income boosted by higher interest income and better lending margins. This has become a low-growth business, though with a 42% return on equity, it remains highly profitable.

The U.S. Retail banking operation had another strong quarter, with profits in U.S. dollar terms improving by 10% as a result of higher loan volumes partly offset by slightly lower lending margins.

At the same time, we’re somewhat concerned about the substantial increase in provisions for credit losses, especially on credit card and auto loans, so we’ll be monitoring this situation closely.

The profitability of TD’s U.S. operations remains substantially lower than its Canadian division. While progress has been evident over the past several quarters, more work still needs to be done to narrow the gap.

Looking ahead, management forecasts that earnings per share while rise by 7% to 10% this year.

TD is currently our only holding among the Canadian banks. And with a 2017 forward price-to-earnings ratio of 13 times and a yield of 3.4%, we intend to remain shareholders. We estimate Toronto-Dominion’s fair value at C$66, or US$49.

TransCanada Corp. (TSX: TRP, NYSE: TRP) reported that fourth-quarter adjusted earnings per share jumped 17% year over year. The dividend was increased by 10.6%. 

The U.S. natural gas pipelines division grew adjusted EBITDA (earnings before interest, taxation, depreciation, and amortization) substantially following the inclusion of the Columbia Pipeline business. Profits from the other main natural gas pipelines varied, with the Canadian lines contributing slightly less, but a sharp increase in profits from the Mexican lines.

The $13 billion acquisition of Columbia Pipeline Group was completed during 2016. TransCanada issued equity and increased its debt levels considerably to finance the acquisition.

The company will also have its work cut out to raise around $32 billion over the next three years to fund capital expenditures, pay dividends, and conclude the $915 million acquisition of Columbia Pipeline Partners.

Regular cash flow will contribute more than half of the funding, but TransCanada will have to turn to the capital markets for the balance. The company intends to maintain its investment-grade credit rating in the process.

Should the previously shelved Keystone XL project eventually get off the ground, the capital requirements would increase by another US$8 billion.

The debt-to-capital ratio is already high, at 62%, and the dividend could be at risk if interest rates rise considerably over the next few years.

The stock had a good run in 2016, and the valuation discount to its peers has now closed. The well-covered dividend still yields a reasonably attractive 3.7%, and management is forecasting further dividend growth of 8% to 10% annually. We estimate TransCanada’s fair value at C$63, or US$47.

TMX Group Ltd. (TSX: X, OTC: TMXXF) reported excellent fourth-quarter results, with adjusted earnings per share jumping 36% year over year. The quarterly dividend was maintained at C$0.45, which is 13% higher than a year ago.

The business delivered a solid performance, with higher revenue from capital formation, equities and fixed-income trading, and derivatives trading. Overall revenue increased by 7% compared to last year, while tight cost control helped grow operating income by 40%.

The balance sheet remains strong, with a debt-to-capital ratio of 18%, and cash flow is ample.

The company’s discount to its global peers has narrowed considerably over the past few months. But it will take further revenue and profit growth to bring the stock’s valuation in line with its competitors.

The dividend yield of 2.5% is attractive. And a payout ratio of 34% of cash flow should provide sufficient room to sustain and grow the dividend.

The share price has risen substantially over the past few months, but further gains may be limited for some time. We estimate TMX Group’s fair value at C$69, or US$52.

Thomson Reuters Corp. (TSX: TRI, NYSE: TRI) delivered what can only be described as “reasonable” fourth-quarter results, despite adjusted earnings per share increasing by 9%. The dividend per share announced for 2017 is 1.5% higher than last year.

On a consolidated basis, revenue was slightly lower, but adjusted EBITDA (earnings before interest, taxation, depreciation, and amortization) increased by 5%.

The largest division, Financial and Risk, continued its gradual improvement, with a 1% increase in EBITDA, though net sales of financial services products decreased for the first time in 11 quarters. One area of concern is the decline in profit recorded by the Legal and Tax and Accounting divisions.

The balance sheet is reasonably levered, with a net debt-to-capital ratio of 30%. And cash flow remains sound, though free cash flow is expected to be lower in 2017 due to a $500 million pension fund contribution made in early 2017, restructuring charges, and the sale of the Science division.

Management forecasts low-single-digit revenue growth for 2017 and slightly higher profit margins, while adjusted earnings per share are expected to grow 14%.

From a valuation standpoint, Reuters is trading in line with its international peers. Although fourth-quarter results were somewhat disappointing, we take comfort in the ongoing operational improvement, the strong balance sheet, the large reduction in share count, and an abundance of cash flow. Shares of Thomson Reuters yield 3.2%, and we estimate the stock’s fair value at C$56, or US$42.

In 2016, WestJet Airlines Ltd. (TSX: WJA, OTC: WJAFF) achieved the second-highest profit in its 20-year history. Even so, results were down quite a bit from the company’s peak in 2015.

For the final quarter of 2016, earnings per share declined 7.8%, while the dividend was left unchanged.

Increased seat capacity, more passengers, and a higher load factor resulted in a 6% rise in revenue, while operating expenses were well contained. The company has effectively countered the weakness in its core domestic markets by adding more international and cross-border flights.

A big concern among investors is the continuing growth in airline capacity and the resulting competition and pressure on fares. During 2016, WestJet increased its available seat miles by 9%. While the load factor was slightly higher than the previous year, revenue per seat mile declined as lower fares reduced profitability.

Management says it plans to continue increasing capacity in 2017 by around 4%. For the first quarter of 2017, the company expects to see higher revenue, more traffic, and higher revenue per seat mile, which would be a welcome reversal from 2016.

Last year, WestJet took on more debt to finance a number of plane deliveries. This weighed on free cash flow, which was negative for the full year. Although higher debt and lower cash flow is not a concern as of yet, the company has to extract additional cash flow from increased capacity before we’ll see higher dividends. Hopefully, this will happen in 2017.

Based on a forward price-to-earnings ratio of 10 times, WestJet’s valuation remains undemanding. Shares of WestJet yield 2.5%, and we estimate the stock’s fair value at C$26, or US$19.

The dividend details for our Dividend Champions are summarized in the table on the following page.