The rally of the past year or so in the Canadian stock market has greatly complicated the job of finding reasonably priced blue chip dividend stocks.
But let's give it a go, anyway. What we're looking for are stocks in the S&P/TSX 60 index that:
- Have both one-year and annualized average five-year dividend growth of at least 5 per cent
- Have a dividend yield of at least 3.5 per cent, which was double the yield on the 10-year Government of Canada bond as of Jan. 20.
- Have a one-year total return of less than 20 per cent – A surprising number of big blue chips have done far better than that in the past year. Can we find some that aren't as pricey?
Just two stocks made it through this screen:
- BCE Inc.:The dividend yield was 4.6 per cent as of Jan. 20, tops in the 60 index, while Globeinvestor.com data shows one- and five-year dividend growth between 5 and 6 per cent. The one-year total return was 15.1 per cent.
- Fortis Inc.: Dividend yield of 3.9 per cent, one- and five-year dividend growth in the 6 per cent range and a one-year total return of 17 per cent.
If you're willing to look at stocks that come close to meeting these criteria, consider:
- Telus Corp.: The yield was 4.4 per cent, one- and five-year dividend growth was in the 9 to 10 per cent range and the one-year total return was 25.6 per cent.
- Power Corp. of Canada: A 4.4 per cent yield and one-year dividend growth of 7.6 per cent. Five-year growth was a bit below par at 2.9 per cent. The one-year total return was 16.5 per cent.
The lowest one-year total return among blue chip dividend stocks was the 5.8 per cent gain of Metro Inc. You get strong dividend growth with Metro, but a yield of just 1.4 per cent.
So much for finding higher-yielding bargains in the blue chip dividend niche. Patient investors may want to watch and wait for opportunities ahead.