To most investors, Canada’s investment story is all about its resource riches. That was certainly one of the main attractions for us when we launched Canadian Edge more than a decade ago.

But the other part of the investment story is that Canada has far greater respect for the dividend than the U.S.

The best example of the importance accorded the dividend up north is the fact that the S&P/TSX Composite Index yields a full percentage point more than the S&P 500–3.2% versus 2.2%.

That may not seem like much at first glance, but take a closer look: The yield on Canada’s benchmark index is nearly 50% higher than its U.S. counterpart. And a difference of a full percentage point quickly adds up thanks to the magic and power of compounding.

Beyond that, as the diverse industries represented by the nearly 30 names in our Dividend Champions Portfolio show, there’s far more to Canada than the resource sector. The same holds true when it comes to stocks with enticing yields and attractive dividend growth.

Even so, we can hardly dismiss what the oil shock has wrought. Canada’s economy has suffered two consecutive quarters of falling gross domestic product (GDP), while the collapse in crude oil has undercut support for the Canadian dollar.

That’s prompted some to wonder whether Canada is overly dependent on its abundance of resources. Although the resource sector, which encompasses key commodities ranging from crude oil to base metals, accounts for about 20% of the country’s economy, during boom times it was responsible for more than a third of business investment.

Now, of course, a significant portion of that capital spending–about 40%–has evaporated in the wake of companies’ dramatic cuts to capital expenditures.

While it’s too soon to tell the full extent of the damage from the oil shock–oil prices still have yet to stabilize–most economists believe the effect was front-loaded toward the first half of the year.

For instance, the consensus forecast calls for GDP to sharply rebound during the second half of the year, with growth averaging 2% annualized compared to the contraction that occurred during the first six months. With oil prices still near cycle lows, the growth drivers are demand from a resurgent U.S. economy further stoked by a falling Canadian dollar.

Meanwhile, Bank of Canada Governor Stephen Poloz recently observed that even when prices are falling Canada’s natural resources are an “endowment [representing] a store of value and a source of future riches.”

And thanks to the declining exchange rate, U.S. investors with an aggressive streak have an opportunity to buy a stake in that source of future riches at a sizable discount–lately around 25%, since the loonie is trading at USD0.75.

As for what the future holds, Poloz takes a constructive view, noting that, “Canada has seen this movie before–we’ve managed it well in the past, and I’m confident we’ll continue to manage it well in the future.”

He doesn’t lament the inevitable boom-and-bust modes of the commodities super cycle, acknowledging that, “… it’s far better for a country to have resources than not to have them.”

Poloz believes the central bank’s efforts toward maintaining “low, stable and predictable inflation” along with a lower exchange rate will make it easier for the economy to absorb the crash in commodities prices, while setting the stage for the eventual rebound.

And as anyone who’s followed the tumultuous commodities markets over the past 15 years can attest, there’s always a rebound.

The Dividend Champions: Portfolio Update

By Deon Vernooy

Last week, Luc Jobin, chief financial officer of Canadian National Railway (TSX: CNR, NYSE: CNI), provided an interesting update on the current performance of the business. Below, we note some of the highlights:

• Railcar volumes are down 5.5% so far this quarter, with declining volumes in coal, oil and mining accounting for the hit.

• A further negative impact will come in the third quarter from the closure of an iron ore mine by a major customer in Minnesota. However, the iron ore transport was only for short distances, so the impact on revenues is considerably less than the carload impact.

• On the more positive side, Jobin highlighted the very strong performance of intermodal (i.e., containers), automotive and lumber.

• He reaffirmed company guidance of double-digit earnings growth this year and said that guidance for 2016 will be provided during the upcoming earnings release.

• Jobin reminded investors that the company has grown dividends 17% annually over the past 20 years and by 25% over the past year. The payout ratio will also be increased over the next few years, to 35% of profits, up from an estimated 29% this year, which implies that dividends will grow faster than profits.

• Share repurchases will also continue. The company has been buying between 2% and 2.5% of outstanding shares over the past few years.

Canadian National faces challenges from falling volumes at present, which will dampen profit growth this year. Nevertheless, the company has taken several steps to reduce costs, while lower fuel prices are also helping.

Despite these headwinds, Canadian National is one of our highest-quality Dividend Champions and is a buy below USD55/CAD73.

Suncor Energy (TSX: SU, NYSE: SU) has agreed to buy an additional 10% equity interest in the Fort Hills oil sands development project from Total E&P Canada for $310 million. Suncor will invest an additional $1 billion in the $15 billion project on top of the already committed $5.5 billion.

Suncor will now own the majority interest in the project in which it’s partnered with Total and Tech Resources.

The latest indications are that project engineering is 90% complete, and construction is 40% complete. First oil is expected to be produced in the fourth quarter of 2017.

At full production, Fort Hills is expected to deliver 73,000 barrels of oil per day to Suncor plus the additional 10% working interest. This will add around 14% to 2015 estimated production of 575,000 barrels of oil per day.

Suncor has a strong balance sheet (25% debt-to-capital ratio), very good cash flow, and cash of around $5 billion, which can absorb the transaction costs and additional capital expenditures.

In response to falling oil prices, Suncor has lowered its capital spending, reduced operating costs and cut back on its share repurchase program. These moves should help support the dividend even if oil prices are lower for longer. Suncor is a buy below USD27/CAD36.

Whistler Blackcomb (TSX: WB, OTC: WSBHF), profiled in the June issue of Canadian Edge, has been ranked the No. 1 ski resort in North America by SKI Magazine. We remain positive on Whistler, as the weaker Canadian dollar attracts foreign visitors. Whistler is a buy below USD16/CAD21.