Key Takeaways
- The July 1 deadline for renewing the Canada‑Mexico‑U.S. trade agreement passed without U.S. consent, leaving the pact in place through 2036 but subject to yearly reviews that could still usher in new tariffs via alternative legal routes.
- Investors seeking insulation from tariff volatility should focus on Canadian companies that sell services rather than goods to U.S. customers, since services are generally exempt from tariff duties.
- The TSI Dividend Sustainability Rating System awards up to 12 points based on dividend history, management commitment, industry stability, balance‑sheet strength, earnings consistency, and market leadership; higher scores indicate more secure dividends.
- Six Canadian service providers met the criteria for strong, sustainable dividends: FirstService Corp., Colliers International Group Inc., Stantec Inc., Thomson Reuters Corp., AtkinsRéalis Group Inc., and Alimentation Couche‑Tard Inc.
- These firms generate a substantial share of their revenue in the United States (ranging from 21 % to 90 %), yet their service‑based models limit direct tariff exposure while offering growth potential and reliable income streams.
Objective of the Screening Process
The analysis began with a clear goal: identify Canadian dividend‑paying companies that are likely to maintain or increase their U.S. sales despite ongoing tariff uncertainty. By concentrating on service providers rather than manufacturers, the screen leverages the fact that services are largely excluded from tariff schedules, thereby reducing direct cost impacts from trade barriers.
July 1 Deadline and Trade Agreement Outlook
Last week’s July 1 deadline for the governments of Canada, Mexico, and the United States to renew the existing trade agreement for a further 16‑year term passed without U.S. approval. Canada and Mexico signaled their willingness to extend the pact, but the United States declined, meaning the current agreement will remain in force through 2036. However, the agreement will now be subject to annual reviews, which, while not automatically creating new tariffs, leave open the possibility for the White House to pursue tariffs through other legal mechanisms that do not conflict with the Supreme Court’s affirmation of congressional authority over tariffs.
Potential for Future Tariffs via Alternative Channels
Even though the yearly review process under the existing accord is not expected to generate fresh tariffs, the administration retains avenues to impose duties on Canada and other countries. These could include executive actions, anti‑dumping investigations, or sector‑specific measures that bypass the formal treaty framework. Consequently, investors must remain vigilant about policy shifts that could affect cross‑border cost structures, even when the overarching trade deal appears stable.
Investment Rationale: Service‑Based Canadian Firms with U.S. Exposure
To shield portfolios from tariff‑related volatility, the analysts recommend holding Canadian stocks that provide services to U.S. clients. Service revenues are generally not subject to tariff levies, offering a natural hedge against trade‑policy shocks. Moreover, many of these businesses have demonstrated strong share‑price appreciation in recent years, suggesting room for further price growth while still delivering dividend income.
Overview of the TSI Dividend Sustainability Rating System
The screening employed the TSI Dividend Sustainability Rating System, a quantitative model that allocates points based on several dividend‑security criteria. One point is granted for five consecutive years of dividend payments; two points for more than five years. An additional two points are awarded if the dividend has been raised within the past five years. One point reflects management’s explicit commitment to maintaining or growing the dividend. One point is given for operating in non‑cyclical industries, which tend to provide steadier earnings. One point recognizes limited exposure to foreign‑currency fluctuations and freedom from political interference. Two points are allocated for a strong balance sheet, characterized by manageable debt levels and adequate cash reserves. Finally, two points reward a long‑term track record of positive earnings and cash flow sufficient to cover dividend payments, and one point is granted for being an industry leader.
Interpretation of Scores and Dividend Sustainability Tiers
Companies that accumulate 10 to 12 points are deemed to have the most secure, or highest‑sustainability, dividends. Scores ranging from seven to nine indicate above‑average sustainability, while four to six points reflect average sustainability. Ratings of one to three points signal below‑average dividend security. This tiered approach allows investors to quickly gauge the relative reliability of a company’s payout amid varying economic and policy environments.
The Six Stocks Identified by the Screen
Applying the rating system yielded six Canadian service providers that met the threshold for strong dividend sustainability. Each firm possesses notable U.S. operations, reinforcing its relevance to the tariff‑concern scenario. The list includes FirstService Corp., Colliers International Group Inc., Stantec Inc., Thomson Reuters Corp., AtkinsRéalis Group Inc., and Alimentation Couche‑Tard Inc.
Company Profiles and U.S. Revenue Contributions
- FirstService Corp. (Toronto) operates two core platforms: FirstService Residential, delivering property‑management services, and FirstService Brands, which encompasses Paul Davis Restoration, CertaPro Painters, and California Closets. Roughly 90 % of its revenue originates in the United States.
- Colliers International Group Inc. (Toronto) provides commercial real‑estate services, including brokerage, financing arrangement, and property‑tax assessment. About 52 % of its sales are generated in the U.S. market.
- Stantec Inc. (Edmonton) is a leading consultant in engineering, project delivery, design, and technology services, with approximately 52 % of its revenue derived from U.S. clients.
- Thomson Reuters Corp. (Toronto) supplies specialized information and analytics to legal, tax, and accounting professionals, and owns the Reuters news service. Roughly 72 % of its revenue comes from the United States; the Thomson family’s holding company, Woodbridge Co. Ltd., controls Thomson Reuters and also owns The Globe and Mail.
- AtkinsRéalis Group Inc. (Montreal) focuses on engineering services and nuclear design/refurbishment, generating about 21 % of its revenue in the United States.
- Alimentation Couche‑Tard Inc. (Laval, Quebec) runs a network of convenience stores across North America and Europe, with 57 % of its sales attributable to the U.S. market.
Analyst Perspective and Closing Thoughts
Scott Clayton, MBA, senior analyst for TSI Network and associate editor of the TSI Dividend Advisor, notes that the selected companies combine durable dividend histories with meaningful U.S. footprints, positioning them to weather tariff‑related headwinds while pursuing growth. By emphasizing service‑oriented businesses with solid balance sheets and consistent earnings, investors can obtain a blend of income and potential capital appreciation that is less directly vulnerable to shifts in trade policy. The analysis underscores the value of a disciplined, dividend‑focused approach when navigating uncertain macroeconomic landscapes.