Fight inflation with dividend growth stocks
Here's how mixing the shares of companies that regularly raise their dividend payments with bonds and guaranteed investment certificates can help retirees keep up with an average annual inflation rate of 2.5 per cent, which is a reasonable estimate for future cost of living increases.
Assumption: Over a five-year period, you invest $30,000 in dividend growth stocks and $70,000 in bonds and GICs with stable interest payments
| Your upfront invest. | Initial Yield | 5-yr Compnd annual increase in your flow of dividends and interest income | Actual income flow from divs & bond/GIC interest YEAR 1 | Actual income flow from divs & bond/GIC interest YEAR 5 | |
|---|---|---|---|---|---|
| Dividend growth stocks | $30,000 | 3.5% | 5.6% | $1,050 | $1,379 |
| Bonds and GICs | $70,000 | 2.0% | 0.0% | $1,400 | $1,400 |
| Entire portfolio | $100,000 | 2.5% | 2.5% | $2,450 | $2,779 |
These dividend stocks kill inflation
Each of these stocks has delivered a five-year annualized dividend growth rate of more than 2.5 per cent. The stocks were drawn from the S&P/TSX 60 index of large, blue-chip corporations.
| Company | Ticker | Recent Price ($) | Yield (%) | 5-yr Div. Gwth (%) | 5-yr Total Rtn (%) |
|---|---|---|---|---|---|
| Potash Corp. | POT-T | 39.38 | 3.9% | 60.0 | 2.7 |
| Suncor Energy | SU-T | 43.40 | 2.1% | 35.7 | 5.5 |
| Cdn Natural Res. | CNQ-T | 44.24 | 2.0% | 33.8 | 8.3 |
| Magna Int'l | MG-T | 106.15 | 1.6% | 33.4 | 38.5 |
| Yamana Gold | YRI-T | 8.03 | 2.1% | 30.3 | -2.9 |
| Goldcorp Inc. | G-T | 27.54 | 2.4% | 27.2 | -3.4 |
| Tim Hortons | THI-T | 59.68 | 2.1% | 26.2 | 16.2 |
| Cdn. Oil Sands | COS-T | 22.64 | 6.2% | 18.5 | 0.7 |
| Metro Inc. | MRU-T | 67.25 | 1.8% | 16.9 | 15.2 |
| Canadian Tire | CTC.A-T | 107.29 | 1.6% | 15.8 | 17.4 |
| Cdn. Nat'l Railway | CNR-T | 63.17 | 1.6% | 14.6 | 21.5 |
| Enbridge Inc. | ENB-T | 52.99 | 2.6% | 13.6 | 24.9 |
| Cameco Corp. | CCO-T | 22.20 | 1.8% | 10.8 | -4.2 |
| BCE Inc. | BCE-T | 48.50 | 5.1% | 9.9 | 17.6 |
| SNC-Lavalin | SNC-T | 50.58 | 1.9% | 9.9 | 7.1 |
| TD Bank | TD-T | 51.90 | 3.6% | 9.0 | 18.0 |
| Telus Corp. | T-T | 39.01 | 3.7% | 8.7 | 23.9 |
| Saputo Inc. | SAP-T | 58.75 | 1.4% | 8.5 | 22.4 |
| Nat'l Bank of Cda | NA-T | 45.41 | 4.1% | 8.2 | 16.8 |
| Royal Bank of Cda | RY-T | 73.00 | 3.9% | 7.3 | 13.4 |
| Cdn Pacific Railway | CP-T | 169.79 | 0.8% | 7.2 | 31.0 |
| Shaw Commun. | SJR.B-T | 26.89 | 4.1% | 5.5 | 10.5 |
| Bank of Nova Scotia | BNS-T | 66.44 | 3.9% | 5.5 | 15.6 |
| Imperial Oil | IMO-T | 53.79 | 1.0% | 5.4 | 5.7 |
| TransCda Corp. | TRP-T | 51.04 | 3.8% | 4.8 | 14.0 |
| Fortis Inc. | FTS-T | 32.45 | 3.9% | 4.2 | 11.0 |
| Thomson Reuters | TRI-T | 38.46 | 3.8% | 3.3 | 4.2 |
| Loblaw Companies | L-T | 47.43 | 2.1% | 3.1 | 7.9 |
| Brookfield Asset Mgt. | BAM.A-T | 45.59 | 1.4% | 2.9 | 20.2 |
| George Weston | WN-T | 81.86 | 2.0% | 2.9 | 8.9 |