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Dividend growth: What's at stake Add to ...

What are we looking for?

Dividend growth is a popular strategy with many investors now given that bond yields are low and stocks remain weak or range-bound at best. Today and tomorrow we'll look at the best options for mid-cap dividend growth in the country.

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George Vasic, the strategist at UBS Securities Canada Inc., has done a series of reports on the best Canadian dividend growth stocks every summer for years now. A couple weeks ago, this column highlighted large-cap dividend growth stocks in the S&P/TSX 60. For the next two days we'll look at mid-cap dividend stocks through the rest of the S&P/TSX composite. We'll look at financials today and non-financials tomorrow.

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"The reason investors need to pay attention to the dividend growers outside the TSX 60 is that they have uniformly outperformed their large-cap peers within the 60, and with better reward/risk ratio," Mr. Vasic said.

The mid-cap financials can be divided into two camps: the first four in the table have a dividend history going back 15 years, while the next six are still establishing a long-term dividend track record.

In focusing on the financial stocks today, it is hard to find much dividend growth in the sector since the financial crisis. One to watch though is Intact Financial Corp., which hiked its dividend this year while most financials were unchanged. It has hiked six times in a row and still has a reasonable 2010 estimated payout ratio of 35 per cent, Mr. Vasic points out.

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