In picking our Key stocks, we pay close attention to a company’s dividend history. We prefer companies that regularly raise the dividends. This makes it easier to beat inflation and profit from share price gains, even if the rest of the stock market goes nowhere.
Share price gains and losses are unpredictable. Last year, for instance, falling Canadian stock prices inflicted losses on investors who sold. Since Christmas, by contrast, rallies in Canadian stock prices have rewarded investors with gains.
Regardless of what the stock market does, however, increasingly profitable companies often raise their dividends year after year. This can help you beat inflation. It also improves your chances of earning capital gains over time (see below).
Since we published our February 1 issue, 10 of our buy-rated Key stocks have raised their dividends. All are ‘dividend aristocrats’. In Canada, that refers to companies that have increased their dividends for at least five years in a row. In the US, the term refers to companies that have raised their dividends for at least 25 consecutive years. 3M Company has increased its dividend for 62 years in a row.
Here are the 10 dividend aristocrats to buy:
■ Atco Ltd. now pays $1.62 a share. That’s up by 7.3 per cent from $1.51 a share. The company delivers an attractive yield of 3.9 per cent.
■ BCE Inc. now pays $3.17 a share. That’s up by five per cent from $3.02 a share. The company’s dividend yields an attractive 5.5 per cent.
■ Canadian National Railway now pays $2.15 a share. That’s up by an impressive 18.1 per cent from $1.82 a share. But it yields a modest 1.9 per cent.
■ Canadian Utilities now pays $1.69 a share. That’s up by 7.6 per cent from $1.57 a share. The dividend yields an attractive 5.1 per cent.
■ Goeasy Ltd. now pays $1.24 a share. That’s up by an outstanding 37.8 per cent from 90 cents a share. The dividend yields a decent 2.7 per cent.
■ Metro Inc. now pays 80 cents a share. That’s up by a healthy 1.1 per cent from 72 cents a share. Even so, the dividend yields a modest 1.6 per cent.
■ Suncor Energy now pays $1.68 a share. That, too, is up by a healthy 16.8 per cent from $1.44 a share. The company yields an attractive 3.7 per cent.
■ 3M Company now pays US$5.76 a share. That’s up by 5.9 per cent from US$5.44 a share. The dividend yields a decent 2.8 per cent.
■ Toromont Industries now pays $5.76 a share. That’s up by 5.9 per cent from $5.44 a share. The dividend yields a modest 1.6 per cent.
■ TransCanada Corp. now pays three dollars a share. That’s up by 8.7 per cent from $2.76 a share. The dividend yields an attractive 5.3 per cent.
Rising dividends also lift stock prices
As we point out above, steadily-growing dividends improve the chances that a company’s share price will climb.
If a company’s share price remains the same, then its dividend yield will go up every time the company raises its dividend, of course. At some point, that yield becomes too juicy to ignore. As that happens, income-seeking investors will bid up the prices of your dividend-growing stocks.
Growing dividends also enable you to beat inflation and pay your bills over the years. That’s true even if the stock market goes nowhere and fails to deliver share price gains.
Whether you get a growing stream of dividend income or share price gains, or some combination of the two, you win!
This is an edited version of an article that was originally published for subscribers in the March 1, 2019, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.
The Investment Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846