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These stocks bring enticing dividend growth momentum

Dividend growth is great, but it's even better with a side order of dividend momentum.

Let's define momentum as a company showing much stronger dividend growth in the past 12 months than in the previous five-year period. Of course, this is a very rough guide to future dividend increases. A company might get cocky and increase dividends in a way that proves unsustainable. But a spike in dividend growth can also suggest a company's executive team sees better times ahead.

Check the financials of a company with recent dividend growth momentum to get a sense of whether it's a one-shot deal. For some ideas on companies to investigate, I ran a screen in which stocks in the S&P/TSX 60 index were ranked by their one-year dividend growth rate. I then pulled out stocks with where the one-year growth rate was significantly higher than the annualized five-year rate. Some names that came up:

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- Canadian Pacific Railway (CP): The dividend jumped almost 43 per cent in the past 12 months, according to Globeinvestor. The annualized five-year growth rate was 10.8 per cent.

- Agnico Eagle Mines (AEM): The one-year growth rate was 25 per cent; with gold prices falling over much of the past five years, the dividend fell almost 9 per cent annually over that period.

- Fortis Inc. (FTS): This dividend growth stalwart boosted its payout by 10.3 per cent in the past 12 months, up from a five-year average of 5.3 per cent.

- TransCanada Corp. (TRP): Up 8.7 per cent over the past 12 months and 6.1 per cent over the past five years.

- Canadian Imperial Bank of Commerce (CM): Up 8.4 per cent in the past year and 6.1 per cent per year in the past five years.

- Power Corp. (POW): Is this onetime dividend growth star on the comeback trail? The one-year dividend growth rate is 7.6 per cent, compared to 2.9 per cent over the past five years.

A few other stocks to consider: Metro Inc. (MRU), Gildan Activewear (GIL) and Saputo Inc. (SAP). Each modestly increased the one-year dividend growth rate over a five-year rate that was already quite strong.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998. Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More


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