What are we looking for?
Sustainable dividends from companies tapped into cryptocurrencies and blockchain technology.
The screen
With intraday swings as wide as 25 per cent or more, cryptocurrencies – such as bitcoin, Bitcoin Cash, Ethereum and litecoin – remain hot, but volatile. These digital currencies focus on security and anonymity, while relying on complex computer code to verify transactions.
Each cryptocurrency runs on a blockchain – a shared ledger of transactions. Using massive computers, "miners" verify those encrypted transactions and add them to the blockchain.
Outside of cryptocurrencies, blockchain will likely play a role in building future transaction systems for banks, stock exchanges and others.
Our search started with dividend-paying companies profiting from cryptocurrencies and blockchains. We then identified those with the diverse operations needed to mitigate risk, before applying our TSI Dividend Sustainability Rating System. It awards points based on eight key factors:
- One point for a long-term (at least five years) record of dividends – two points for more than five years of continuous payments;
- Two points if it has raised the payment in the past five years;
- One point for management’s public commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency exchange rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
- One point if the company is a leader in its industry.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability rating. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six stocks: Nvidia makes complex computer chips used to verify cryptocurrency transactions. Intel is catching up with its own specialized chips. In partnership with several banks, Microsoft offers a blockchain service, while IBM continues to work on cross-border blockchain payment systems. CME Group and CBOE Global Markets – the world's two largest futures exchanges – now trade bitcoin futures. All six of our top stocks appear in the accompanying table.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.