The Globe and Mail

WHAT ARE WE LOOKING FOR?

Every summer, George Vasic, strategist at UBS Securities Canada, releases a series of reports on the best dividend-growth stocks in Canada, based on data for the past 10 years. And this summer's edition is likely to attract more attention than usual.

A year ago, markets, not only in Canada but also around the world, seemed to be going only one way – up. But that changed last August when news of the global credit crunch started to hit the headlines. Down the markets went. And dividend-paying issues probably gained more fans than they had before, because of the market situation.

Yesterday, we updated the pricing information on Mr. Vasic's summer, 2007 list of stocks included in the S&P/TSX 60 index – the blue-chip issues in other words.

Today, we move beyond that and look at other dividend-growth stocks listed on the Toronto Stock Exchange.

WHY DIVIDEND-GROWTH STOCKS?

Mr. Vasic found that dividend-growth issues make superior investments. He recommends investors don't chase the high-yield stocks, as the stocks with the best dividend-growth records usually outperform them and the market as well.

As with the TSX 60 issues, a significant number of the dividend-growth stories are in the financial sector. Mutual fund companies are particularly evident in the rankings, including AGF Management and IGM Financial, which numbers Investors Group and Mackenzie Financial among its subsidiaries.

But other sectors were represented as well, including industrial firm CCL Industries, Empire Co., whose holdings include insurance and real estate interests and food stores, and TSX Group, which operates the Toronto Stock Exchange.

WHAT WE FOUND IN OUR UPDATE

Each stock has fallen over the past 12 months, but the range of declines varied all the way from AGF's 36-per-cent drop to TSX Group's 1.5-per-cent drop. Moreover, all but four – IGM Financial, AGF and Empire – have lost ground over the past month. Power Financial Corp. was basically unchanged.

We also noted that the dividend yields for this group of companies were closer together than they were for the blue-chip dividend-growth stocks. The range for this group was 1.6 to 4.4 per cent whereas the range for the blue chips was between 0.6 and 6.2 per cent.

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