Potash Corp. fell 7.8 percent to $14.84 in New York, the largest decline since July 2013.Reuters
Potash Corp. is the king of dividend growth among the biggest blue chips stocks in the Canadian stock market over the past five years, but income-focused investors may want to take a pass on it.
Potash grew its dividend by an average annual 29 per cent over the past five years, even including a 34-per-cent cut in the in the past year. No shame here – Potash is in a cyclical business and must adjust its dividend to reflect moves in the price of potash, a fertilizer component. But income investors need consistency, not a zig-zagging dividend.
How best to gauge consistency? One thought is to compare the five-year dividend growth rate with the one-year number. The past year or so has been a challenge for many companies as a result of a weak economy. Maintaining dividend growth at levels consistent with the past five years would be a sign of stability.
To find the kings of consistency in dividend growth, I ranked the stocks in the S&P/TSX 60 index of big blue chips by five year dividend growth rate and then noted the ones with one-year growth rates that are no more than 2 percentage points above or below the five year rate. Here are the top five kings of consistency:
1.) Canadian National Railway (CNR): A one-year growth rate of 20 per cent and a five-year rate of 18.2 per cent.
2.) Magna International (MG): One year 13.6 per cent, five year 14.9 per cent.
3.) Telus Corp. (T): One year 10 per cent, five year 10.9 per cent.
4.) BCE (BCE): One year 5 per cent, five year 6.7 per cent
5.) SNC-Lavalin (SNC): One year 4 per cent, five year 4.4 per cent
Note: Stocks were included here only if their five-year dividend growth rate was above 4 per cent. If we relax that standard slightly, Bank of Montreal (one-year dividend growth of 5 per cent, five-year growth of 3.7 per cent) and Loblaw Cos. (one-year growth of 2 per cent and five-year growth of 3.6 per cent) would be next in line.
Coming soon: Blue chip stocks that are ramping up their dividend growth the most.
Rob Carrick